Irving Fisher and Price-Level Targeting in Austria: Was Silver the Answer?

Authors

  • RICHARD C.K. BURDEKIN,

  • KRIS JAMES MITCHENER,

  • MARC D. WEIDENMIER


  • We thank Andy Rose, Larry Neal, Marc Flandreau, Charles Calomiris, Pierre Siklos, Clemens Jobst, Matthias Morys, Mark Thornton, and two anonymous referees for suggestions and helpful comments.

  • Richard C.K. Burdekinis at Claremont McKenna College (E-mail: richard.burdekin@claremontmckenna.edu). Kris James Mitcheneris at Santa Clara University and NBER (E-mail: kmitchener@scu.edu). Marc D. Weidenmieris at Claremont McKenna College and NBER (E-mail: marc.weidenmier@claremontmckenna.edu).

Abstract

The question of price level versus inflation targeting remains controversial. Disagreement concerns not so much the desirability of price stability but rather the means of achieving it. Irving Fisher argued for a commodity dollar standard where the purchasing power of money was fixed by indexing it to a basket of commodities. We show that movements in the price of silver closely track the movements in overall prices during the classical gold standard era. The one-to-one relationship between paper and silver bonds suggests that a simple “silver rule” could have sufficed to fix the purchasing power of money.

Ancillary