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

Michael David Bordo () and Pierre-Cyrille Hautcoeur ()

No 9860, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

JEL-codes: E63 M4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2003-07
Note: DAE IFM ME
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