This paper provides a new explanation for Gibson's Paradox -- the observation that the price level and the nominal interest rate were positively correlated over long periods of economic history. We explain this phenomenon interms of the fundamental workings of a gold standard. Under a gold...

We examine the relationship between prices and interest rates for seven advanced economies in the period up to 1913, emphasizing the UK. There is a significant long-run positive relationship between prices and interest rates for the core commodity standard countries. Keynes (1930) labelled this...

Traditional economics assumes that interest rate effects inflation by changing the aggregate demand (Barth and Ramay, 2002). On the other hand, many economists in recent years have explored the cost side effects of monetary transmission and found very strong evidences in favour of cost channel....

The monetary policy rules used by central banks these days are based on the assumption that inflation could be reduced by increasing interest rate. On contrary, Tooke (1774-1858), the forefather of monetary economics, was of the view that the relationship between interest rate and inflation...

I propose a dynamic production model under the joint constraints of technology, budget and no arbitrage. Comparative static and dynamic analysis indicate that this model is consistent with the behavior of firms in reality, and can explain a wide range of economic phenomena. Compared with...

The Gibson paradox,long observed by economists and named by John Maynard Keynes (1936),is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation.In the mode,spending is driven in part by changes...

The Gibson paradox, long observed by economists and named by John Maynard Keynes (1936), is a positive relationship between the interest rate and the price level. This paper explains the relationship by means of interest-rate, cost-push inflation. In the model: spending is driven in part by...

Many empirical studies have found that interest rate have a positive effect on the price level. This paper pursues an obvious, but neglected explanation: interest payments are a cost of production that is at least in part passed on to costumers. A model shows that the cost-push effect of...

Recent literature has advanced the view that the Gibson paradox, or the positive correlation of the price level with nominal interest rates, is nearly always a gold standard phenomenon. We argue that the Gibson correlation is more accurately classified as a statistical artifact of commodity...

This paper tests the existence of Gibson paradox using the traditional and modern time series techniques in the case of annual Turkish data. Even though the results from the traditional Gibson paradox regression suggested a positive relationship between the interest rates and the prices levels...

In this paper, we use new data and modern time series econometrics to reassess the relationship between interest rates, prices and inflation in Britain across the two and a half centuries from 1750 to 2006 for which reliable data are available. We pay particular attention to monetary regimes...

This paper provides a new explanation for Gibson's Paradox -- the observation that the price level and the nominal interest rate were positively correlated over long periods of economic history. We explain this phenomenon interms of the fundamental workings of a gold standard. Under a gold...