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Why didn't France follow the British Stabilization after World War One?

  • Michael D. Bordo
  • Pierre-Cyrille Hautcoeur

We show that the size of the public debt, the budget deficit and the monetary overhang made it impossible for France to stabilize its price level and return to the pre-war parity immediately after World War I, even on the anti-keynesian assumption that a stabilization would not have had any negative effects on real income. The reason for the immediate postwar inflation then was not mismanaged policy but a wise choice in the French context. Nevertheless, a stabilization at a devalued franc which would have been substantially higher than the rate achieved by Poincar‚‚ in 1926 was historically possible in early 1924, and it would likely have benefited not only France but the entire international monetary system.

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File URL: http://www.nber.org/papers/w9860.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9860.

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Date of creation: Jul 2003
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Handle: RePEc:nbr:nberwo:9860
Note: DAE IFM ME
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  1. Sicsic, Pierre, 1992. "Was the franc poincare deliberately undervalued?," Explorations in Economic History, Elsevier, vol. 29(1), pages 69-92, January.
  2. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, 04.
  3. Hautcoeur, P-C. & Sicsic, P., 1998. "Threat of a Capital Levy, Expected Devaluation and Interest Rates in France during the Interwar Period," Working papers 50, Banque de France.
  4. Eichengreen, Barry, 1989. "The Capital Levy in Theory and Practice," Department of Economics, Working Paper Series qt11j4756b, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Barry Eichengreen & Peter Temin, 1997. "The Gold Standard and the Great Depression," NBER Working Papers 6060, National Bureau of Economic Research, Inc.
  6. Benjamin, Daniel K & Kochin, Levis A, 1979. "Searching for an Explanation of Unemployment in Interwar Britain," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 441-78, June.
  7. Peter Temin, 1991. "Lessons from the Great Depression," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262700441, June.
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