Monetary Reform and Monetary Union: A Comparison between 1948 and 1990

Radical monetary reforms were carried out in postwar West Germany in 1948 and, some 42 years later, in the transition economy of East Germany. In postwar West Germany employment was up by almost 1.5 million within four years, industrial production climbed by 129 per cent and exports experienced a more than ninefold increase (Table 12.1). The first four years after the reforms in East Germany in 1990, on the other hand, saw a decrease in employment by more than 2.5 million, as industrial production declined by nearly 25 per cent and exports by more than 50 per cent.1, 2 At the same time, however, the standard of living increased steeply as domestic demand steadily exceeded East Germany’s GDP during the first four years after the reforms, reaching a level of 182 per cent of GDP in 1994. This chapter examines differences and similarities between the monetary reforms introduced in 1948 and 1990 and the extent to which the differences influenced subsequent economic developments.