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The economic consequences of the 1953 London Debt Agreement

Author

Listed:
  • Gregori Galofré-Vilà
  • Christopher M Meissner
  • Martin McKee
  • David Stuckler

Abstract

The London Debt Agreement (LDA) eliminated half of West Germany’s external debt. Subsequent years witnessed unprecedented economic growth. The LDA likely contributed to economic growth by creating fiscal space for public investment and social spending, restoring the full convertibility of the Deutsche Mark, and stabilising inflation. The LDA was associated with a substantial and statistically significant rise in real per capita social expenditure relative to other spending categories. Synthetic control methods also show that under the counterfactual of no debt relief, overall expenditure might have been lower by 17 percent. The LDA also facilitated the reintegration of Germany into global markets and full convertibility of the Deutsche Mark by catalysing accumulation of sufficient US-Dollar reserves.

Suggested Citation

  • Gregori Galofré-Vilà & Christopher M Meissner & Martin McKee & David Stuckler, 2019. "The economic consequences of the 1953 London Debt Agreement," European Review of Economic History, European Historical Economics Society, vol. 23(1), pages 1-29.
    • Handle: RePEc:oup:ereveh:v:23:y:2019:i:1:p:1-29.
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    File URL: http://hdl.handle.net/10.1093/ereh/hey010
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Debt forgiveness in the German mirror
      by nmpostelvinay in NEP-HIS blog on 2016-10-12 17:55:09

    Citations

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    Cited by:

    1. Clavin, P. & Corsetti, G. & Obstfeld, M. & Tooze, A., 2021. "Lessons of Keynes's Economic Consequences in a Turbulent Century," Cambridge Working Papers in Economics 2169, Faculty of Economics, University of Cambridge.
    2. Mitchener, Kris & Trebesch, Christoph, 2021. "Sovereign Debt in the 21st Century: Looking Backward, Looking Forward," CEPR Discussion Papers 15935, C.E.P.R. Discussion Papers.
    3. Martin Guzman & Domenico Lombardi, 2018. "Assessing the Appropriate Size of Relief in Sovereign Debt Restructuring," Documentos de trabajo del Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET) 2018-26, Universidad de Buenos Aires, Facultad de Ciencias Económicas, Instituto Interdisciplinario de Economía Política IIEP (UBA-CONICET).
    4. Fernando Losada, 2020. "A Europe of Creditors and Debtors: Three Orders of Debt Relations in European Integration," Journal of Common Market Studies, Wiley Blackwell, vol. 58(4), pages 787-802, July.
    5. Clavin, P. & Corsetti, G. & Obstfeld, M. & Tooze, A., 2021. "Lessons of Keynes's Economic Consequences in a Turbulent Century," Cambridge Working Papers in Economics 2169, Faculty of Economics, University of Cambridge.
    6. Gregori Galofre-Vila, 2021. "The Costs of Hyperinflation: Germany 1923," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 2101, Departamento de Economía - Universidad Pública de Navarra.

    More about this item

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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