The role of Rentiers in the stabilization processes of the 1920s

The literature has underlined the existence of widespread economic regularities in the stabilization processes of the 1920s. This paper shows that political regularities also existed. The main reasons for these regularities are explained in terms of a political exchange hypothesis according to which interest groups express a demand for inflation (or deflation) and political parties seek to gain power by representing the interests of certain groups. A political equilibrium that leads to stabilization is a situation where a coalition of parties supported by social groups interested in disinflation obtains the majority. In the stabilizations that took place in European countries during the 1920s, marked political regularities can be seen and are econometrically tested. The differences in the way this equilibrium was achieved can explain the different paths to stabilization and its forms. Three stylized types of stabilizations can be identified, each of which is closely related to the historical experience of France, Germany, and Great Britain. Copyright , Oxford University Press.