specie flow mechanism

Definition

Economics

  • Under the gold standard, the mechanism by which international payments would adjust. A country with high inflation would export less, import more, and thus lose specie, i.e., gold. With the money supplyfixed to the quantity of gold, the resulting monetary contraction would reduce prices. Due to David Hume.
http://www.dictionarycentral.com/definition/specie-flow-mechanism.html