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Halting Inflation in Italy and France After World War II

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  • Alessandra Casella
  • Barry Eichengreen

Abstract

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, for France a year later. Traditional explanations for the regained price stability cannot account for the difference in timing. In this paper, we use the 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 carne 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 in stabilizing can be imputed to differences in the political climate and to the ambitious program of public investment.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3852.

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Date of creation: Sep 1991
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Publication status: published as Monetary Regimes in Transition Michael Bordo and Forrest Capie eds., Cambridge University Press: Cambridge , 1992
Handle: RePEc:nbr:nberwo:3852

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References

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  1. Albert O. Hirschman & Robert V. Rosa, 1949. "Postwar credit controls in France," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 348-360.
  2. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
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Cited by:
  1. J. Bradford De Long & Barry Eichengreen, 1993. "The Marshall Plan: History's Most Successful Structural Adjustment Programme," J. Bradford De Long's Working Papers _109, University of California at Berkeley, Economics Department.
  2. Martinez Oliva, Juan Carlos, 2005. "The Italian Stabilization of 1947: Domestic and International Factors," MPRA Paper 16396, University Library of Munich, Germany, revised 2007.
  3. J. Bradford De Long & Barry Eichengreen, . "The Marshall Plan as a Structural Adjustment Programme," J. Bradford De Long's Working Papers _112, University of California at Berkeley, Economics Department.
  4. Philippe, LEDENT & Isabelle, CASSIERS, 2006. "Learning to manage external constraints : Belgian monetary policy during the Bretton Woods era (1944-1971)," Discussion Papers (ECON - Département des Sciences Economiques) 2006032, Université catholique de Louvain, Département des Sciences Economiques.
  5. Martinez Oliva, Juan Carlos, 2007. "The Italian Stabilization of 1947: Domestic and International Factors," Institute of European Studies, Working Paper Series qt7ng1c97h, Institute of European Studies, UC Berkeley.
  6. Seghezza, Elena & Morelli, Pierluigi, 2014. "Conflict inflation and delayed stabilization," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 171-184.

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