In the aftermath of World War II, Italy and France experienced high inflation. The two countries enacted remarkably similar economic policy measures, but stabilization came at different times: for Italy at the end of 1947, and for France a year later. Traditional explanations for the restoration of price stability cannot account for the difference in timing. In this paper, we use this international comparison to shed light on the nature of the inflationary process and on the cause of its decline. We conclude that inflation was symptomatic of an unresolved distributional conflict, and came to an end when one political group, in both countries the Left, accepted its defeat. The Marshall Plan helped to bring the stabilization about by reducing the costs to the group offering concessions. We argue that the French delay can be attributed to differences in the political climate and to the ambitious programme of public investment.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
594.
Find related papers by JEL classification: E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics N14 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Europe: 1913-
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