International Economics and Domestic Politics: Notes on the 1920s

Barry Eichengreen and Beth Simmons

in Banking, Currency, and Finance in Europe Between the Wars

Published in print September 1995 | ISBN: 9780198288039
Published online November 2003 | e-ISBN: 9780191596230 | DOI:
 International Economics and Domestic Politics: Notes on the 1920s

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There were radical differences in post‐war exchange‐rate regimes, and associated monetary and fiscal policies. Some countries accommodated moderate inflation by abandoning their pre‐war gold parities; others subjected themselves to painful deflation in order to restore gold convertibility at the pre‐war rates. Major policy differences were again evident in response to the Great Depression, with some eagerly abandoning the gold standard, others seeking at all costs to preserve it. To explain these differences, Eichengreen and Simmons investigate the relationship between economic policy and domestic political systems. They find that countries with independent central banks, more stable governments, larger governing majorities, and, more surprisingly, left‐wing parliamentary majorities were better able to resist currency depreciation in the 1920s.

Keywords: central banks; currency depreciation; deflation; exchange rates; fiscal policy; gold standard; Great Depression; inflation; monetary policy; political systems

Chapter.  7065 words. 

Subjects: Macroeconomics and Monetary Economics

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