The Price of Gold and Monetary Policy （黄金的价格和货币政策）.pdf

The Price of Gold and Monetary Policy William D. Lastrapes Associate Professor and George Selgin Associate Professor Department of Economics University of Georgia Athens, Georgia 30602 Phone: 706/542-3569 Fax: 706/542-3376 E-mail: last@ September 1996 The Price of Gold and Monetary Policy ABSTRACT Pronouncements by Alan Greenspan and others suggest a role for the price of gold in shaping monetary policy. Here, we look for evidence of such a role by examining the comovement of gold prices and the federal funds rate, by reviewing FOMC minutes, and by estimating a VAR model that identifies the Fed’s response to fluctuations in the price of gold by controlling for other relevant policy variables. We find evidence that, since the early 1980’s, the Fed has responded to sustained changes in gold’s price, thereby limiting long-run changes in that price. JEL classification: E4, E5 1. Introduction Does the price of gold play a role in formulating current monetary policy? Histori- cally, gold has served a unique role as the most pervasive form of commodity money, and continues to be perceived as a safe haven from fiat money. Fed Chairman Alan Greenspan has called the price of gold a “very good indicator of future inflation,” and there has long been speculation in the popular press (e.g. Forbes 1991, Ullmann 1994) concerning a role for gold’s price as an intermediate monetary policy target: the Federal Reserve responds to changes in the price of gold in the short-run because it cannot afford to wait for lower- frequency information conce