A BEJM Contributions article.

Abstract

Governments determine the size of the unit of value just as they determine the length of the length and weight of physical units of measure. What are the different ways that a government can control the size of the unit of value, that is, control the price level? In general, the government designates a resource—gold, paper currency, another country’s currency—and defines its unit of value as a particular amount of that resource. An interesting variant—proposed by Irving Fisher in 1913 and implemented more recently in Chile—is to alter the resource content of the unit to stabilize the price level. Another idea is to alter the interest rate paid on reserves in a way that stabilizes the price level.

Submitted: September 18, 2001 · Accepted: July 15, 2002 · Published: July 23, 2002

Originally published in Contributions to Macroeconomics.

Recommended Citation

Hall, Robert (2002) "Controlling the Price Level," Contributions to Macroeconomics: Vol. 2 : Iss. 1, Article 5.
Available at: http://www.bepress.com/bejm/contributions/vol2/iss1/art5