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Threat of a Capital Levy, Expected Devaluation and Interest Rates in Inter-War France


  • Sicsic, Pierre


The aim of this paper is to isolate and measure the respective importance of political and economic aspects in two critical episodes of the French inter-war period: the stabilization process of the mid-1920s and the reluctance to abandon the gold standard during the 1930s. We do this by separating expectations of taxation and of devaluation that are implicitly included in the prices of various categories of French bonds. On the 1924–6 crisis, we show first that there was no expectation of government default; second that a substantial part of the high level of interest rates in 1925 can be explained by expectations of a capital levy or other taxation devices; third that hyperinflation was not expected, even at the moment of maximum price rise, since implied five-year interest rates were lower than 20% and since the expected value of the franc was not as low as the spot value. For the 1930s, we show that expectations of a depreciation of the franc explain the rise in interest rates, so that no independent effect of fiscal policy was expected.

Suggested Citation

  • Sicsic, Pierre, 1998. "Threat of a Capital Levy, Expected Devaluation and Interest Rates in Inter-War France," CEPR Discussion Papers 1824, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1824

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    References listed on IDEAS

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    7. Charles I. Jones, 1997. "On the Evolution of the World Income Distribution," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 19-36, Summer.
    8. Sjögren, Anna, 1998. "The Effects of Redistribution on Occupational Choice and Intergenerational Mobility: Does Wage Equality Nail the Cobbler to His Last?," SSE/EFI Working Paper Series in Economics and Finance 239, Stockholm School of Economics.
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    More about this item


    capital levy; Cartel des gauches; consols; Conversion; Devaluation; exchange rate guarantee; Exchange Rates; Expectations; France; Interest Rates; interwar; Laval; poincaré; Taxation;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-


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