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Economic stagnation in Weimar Germany: A structuralist perspective

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  • Block,Thorsten

    (MERIT)

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    Abstract

    Mexico and Argentina in the 1990s as well as Weimar Germany in the 1920s implemented similar exchange-rate-based stabilization programs which were successful in stopping inflation, but failed to generate the domestic savings and investment rates necessary for a sustainable growth path. It is argued that in both cases substantial foreign capital inflows were attracted by a stable nominal exchange rate and high interest rates, which alleviated the distributional struggle driving high inflation. However, this incentive structure caused a profit squeeze in the tradable goods sector due to an appreciating real exchange rate precipitating the ultimate collapse of the programs.

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    Bibliographic Info

    Paper provided by Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT) in its series Research Memorandum with number 025.

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    Date of creation: 2001
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    Handle: RePEc:unm:umamer:2001025

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    Keywords: economics of technology ;

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    1. Chisari, Omar O. & Fanelli, JoseMaria & Frenkel, Roberto, 1996. "Argentina: Growth resumption, sustainability, and environment," World Development, Elsevier, vol. 24(2), pages 227-240, February.
    2. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
    3. Kindleberger, Charles P., 1993. "A Financial History of Western Europe," OUP Catalogue, Oxford University Press, edition 2, number 9780195077384, September.
    4. Voth, Hans-Joachim, 1995. "Did High Wages or High Interest Rates Bring Down the Weimar Republic? A Cointegration Model of Investment in Germany, 1925–1930," The Journal of Economic History, Cambridge University Press, vol. 55(04), pages 801-821, December.
    5. Rebelo, Sérgio, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," CEPR Discussion Papers 1220, C.E.P.R. Discussion Papers.
    6. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc.
    7. Gabriel Palma, 2000. "The Magical Realism of Brazilian Economics: How to Create a Financial Crisis by Trying to Avoid One," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-16, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    8. Rudiger Dornbusch & Alejandro Werner, 1994. "Mexico: Stabilization, Reform, and No Growth," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 253-316.
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