This study examines the behavior of money, inflation, and output under fiat and commodity standards to better understand how changes in monetary policy affect economic activity. Using long-term historical data for 15 countries, the study finds that the growth rates of various monetary aggregates are more highly correlated with inflation and with each other under fiat standards than under commodity standards. Money growth, inflation, and output growth are also higher under fiat standards. In contrast, the study does not find that money growth is more highly correlated with output growth under one type of standard than under the other.
This article is reprinted, with permission, from the _Journal of Political Economy_ (December 1997, vol. 105, no. 6, pp. 1308–21). Copyright 1997 by The University of Chicago. All rights reserved. https://doi.org/10.1086/516394