Interests, Prices and the Barsky and Summers' Resolution of the Gibson Paradox Under the Gold Standard System

This paper presents a structural monetary framework featuring a demand function for non-monetary uses of gold, such as the one drawn by Barsky and Summers in their 1988 analysis of the Gibson paradox as a natural concomitant of the gold standard period. That structural model is subject to government rules to command the money supply. Its fiduciary version obtains Fisherian relationships as particular cases. Its gold standard solution yields a model similar to the Barsky and Summers model, in which interest rates are exogenous and subject to productivity or thrift external shocks. This paper integrates government bonds in the analysis, treats interest rates endogenously, and shifts the responsibility for the shocks to the government budgetary financing policies. The Gibson paradox appears as practically the only class of behavioral pattern open for interest rate and price movements under a pure gold standard economy. Fisherian-like relationships are utterly ruled out