HOW CURRENCIES CRASH AND DIE: WARS AND CURRENCY VALUATION

Christopher Warburton

Applied Econometrics and International Development, 2022, vol. 22, issue 2, 49-66

Abstract: This paper examines the preconditions for currency crashes and demonetization. Though the preconditions for currency crashes and demonetization are variegated, the paper emphasizes the close relationship between wars and demonetization. Bayesian analysis and more than ten centuries of information suggest that there is a thirty-five-percent chance (maximum likelihood) that wars could lead to hyperinflation and demonetization. The paper concludes that economic repression is greater than military might and that wars should be considered to be an outdated instrument of foreign policy. Specifically, nations with ambitions to preserve their currencies and increase national income (or aggregate welfare) should avoid wars at all cost.

Keywords: Currency; crash (search for similar items in EconPapers)
JEL-codes: E02 E17 F02 F31 F32 G12 (search for similar items in EconPapers)
Date: 2022
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