Gibson's Paradox


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Gibson's Paradox

An observation that interest rates are correlated with wholesale prices rather than the inflation rate. Gibson's Paradox was first discussed by John Maynard Keynes in 1930; at the time, the idea was controversial, as most economists believed that interest rates correlated with changes to prices rather than the prices themselves. It is important to note that Gibson's paradox only applied when money was on the gold standard. See also: Keynesian economics.
References in periodicals archive ?
invalidation since 1995 of Gibson's Paradox -- that gold
to around $270 rather than rising toward the $500 level as Gibson's paradox and the model of it constructed by Summers indicates they should have.