Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2011:19: Belling the cat: Eli F. Heckscher on the gold standard as a discipline device

Klas Fregert ()
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Klas Fregert: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: Unlike Knut Wicksell, Eli Heckscher did not believe the time had arrived for “managed money” to replace the gold standard after World War I. The war had shown that only a gold standard could bind the central bank to a time-consistent policy with reasonable price stability. Heckscher likened the problem of reinstating the gold standard to “Belling the cat” in Aesop’s fable. When the international gold standard crumbled in the Great Depression, he supported the Swedish price stabilization regime as a temporary system. Heckscher was an early discoverer of the time-consistency problem in monetary policy and hence stressed the importance of the institutional framework of monetary policy.

Keywords: Heckscher; time-consistent policy; devaluation; deflation; gold standard

JEL-codes: B22; E31; E42

35 pages, June 14, 2011

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Published as
Klas Fregert, (2013), 'Belling the cat: Eli F. Heckscher on the gold standard as a discipline device', History of Political Economy, vol 45, no 1, pages 39-59

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