Tales from the Bretton Woods

An analogy has been made between the collapse of the Bretton Woods system in 1971 and the recent Eurozone crisis. The build up of TARGET balances in the Eurosystem of Central Banks after 2007 with the GIPS (deficit countries having large liabilities) and Germany (a surplus country) with large claims is seen as similar to the rising and persistent balance of payments deficits and declining gold reserves by the United States as center country of the BWS gold dollar standard in the 1960s. This paper argues that a better Bretton Woods analogy is between the UK which ran persistent balance of payments deficits reflecting low productivity growth and overly expansionary financial policies (an analogy to the GIPS) countries with West Germany which ran persistent balance of payments surpluses reflecting high productivity and conservative financial policies (analogous to Germany today). However Bretton Woods is very different from the Eurozone in many dimensions. An even better analogy than BWS is a comparison of the clearing mechanism in the U.S..--The Gold Settlement account—with the Target payments mechanism for the Eurozone. In the early 1930s massive gold flows from the interior, hard hit by banking panics, to New York City were similar to the payments imbalances within the Eurozone in the recent crisis. The Federal Reserve did little to accommodate the demands for liquidity leading to a collapse of the payments system in March 1933. By contrast the build up of TARGET reflected full accommodation of the liquidity demands of the member states. TARGET represented an institutional innovation that prevented a repeat of the 1930s payments crisis.     

‘Armament in depth’ or ‘armament in breadth’? German investment pattern and rearmament during the Nazi period1

Today, most scholars agree that Nazi Germany did not follow a premeditated Blitzkrieg strategy in the late 1930s and at the beginning of the Second World War. However, the question of the extent to which Germany's economy had been prepared for a longer war is still debated because statistical information on Germany's investment pattern is fragmentary and data on the structure of prewar German military expenditure are not available. Relying on newly discovered sources, this article closes these gaps. The Nazi regime clearly shifted its investment towards preparation for war from the mid‐1930s on, and though armaments purchases stagnated during the period from 1937 to 1939, investment in munitions industries grew considerably. Consequently, during the late 1930s the Nazis pursued a ‘sustainable’ rearmament strategy necessary for fighting a longer war. Yet, despite massive capacity enlargements in the munitions industries, total German investment was not unusually high by today's definition because contemporary figures included a significant amount of armaments purchases.     

Nazi economic imperialism and the exploitation of the small: evidence from Germany’s secret foreign exchange balances, 1938‐1940

This article re‐examines the hypothesis of Hirschman and Child that Nazi trade policy before the Second World War exploited the smaller European countries. Archival evidence on foreign exchange balances for 1938‐40 shows that trade policies alone had only a small effect. Earlier dependence of south‐eastern Europe on Germany was caused partly by the collapse of south‐east European trade with the Soviet Union. Adjusted figures reveal a regional pattern similar to that of 1913. Generally, exploitation began with military occupation, but was then on a massive scale. Results again confirm Milward's findings on the westward orientation of the German war economy.     

Africa's clientelist budget policies revisited: public expenditure and employment in Kenya,Tanzania and Uganda, 1960–2010

What can be learned about policy prioritization in Africa by examining long‐run trends in public expenditure and employment? Many have contended that Africa's post‐colonial leaders pursued economically unproductive budget policies that prioritized the growth of their patronage networks over socially beneficial spending, resulting in bloated payrolls, persistent deficits, and a large rent‐seeking public service. Using a purpose‐built dataset of annual public expenditure and employment series from Kenya, Tanzania, and Uganda for 1960–2010 against which to test these assumptions, this article questions whether there was anything exceptional about the growth or composition of East Africa's post‐independence expenditure. All three states grew and contracted in roughly the same periods as other regions of the world, although their contraction after 1980 was particularly marked. Industrial policy and capital investments influenced budget priorities in the early independence era, while military expenditure and debt service payments escalated in the late 1970s. The government wage bill, meanwhile, fell as a proportion of total spending over the same period. To finance employment growth while the wage bill contracted, governments allowed real wages to plummet in the 1970s–90s. In light of these external constraints and legacies, this article questions whether a budget unencumbered by patronage would have looked very different.     

How the German crisis of 1931 swept across Europe: a comparative view from Stockholm†

According to conventional wisdom, the fall of the Swedish currency in September 1931 was caused by the sterling crisis. This article shows that the road towards devaluation began earlier and that financial linkages with Germany proved to be more important than Sweden's economic and monetary relations with Great Britain. It all started in late 1929 when the Swedish financier Ivar Kreuger gave a loan to the German government in exchange for the match monopoly, thus tying his business ventures to Germany's solvency. In addition, a part of this loan was financed by large US dollar credits from the two largest Swedish banks that, in turn, accumulated a sizeable foreign short‐term deficit. When in June 1931 the German fiscal crisis began to escalate, international investors ceased to consider Sweden a safe haven because they knew about the linkages between the German government, Kreuger, and the Swedish banking system. This downgrading, in combination with the foreign short‐term deficit of the banking sector, proved lethal for the reserve position of the Swedish central bank, once the international liquidity crisis in mid‐July 1931 erupted. The sterling crisis only put the final nail in the coffin.     

The sustainability of trade deficits in the presence of endogenous structural breaks: Evidence from the Indian economy

This study examines the long-run relationship between exports and imports of the Indian economy during 1950–51 to 2008–09. Applying unit root test and cointegration technique that allows for endogenously determined structural break in the relationship, the results do not support the existence of any long-run equilibrium relationship between exports and imports and interest payments on net debt for India. Individually exports and imports have multiple breaks clustered roughly around three periods: early and mid seventies – the ‘comfort period’ in the country's balance of payments; 1986–87 that witnessed a sudden jump in exports trend after experiencing a flat trend in the first half of 1980s; and 1997–98 following the East Asian currency crisis. The findings imply that India's macroeconomic policies have not been very effective to ensure sustainability of trade deficit in the long-run and suggest that India is in violation of its international budget constraint.     

The debt brake in the eyes of the German population

In response to the recent sovereign debt crisis, the member states of the European Union agreed to enact balanced budget rules in their national legislation. However, little is known about the public’s opinion of balanced budget rules. To fill this gap, we conducted a survey among 2,000 representatively chosen German citizens. Our findings suggest that 61 % of the German population supports the debt brake, whereas only 8 % oppose it. However, approval rates differ notably among various subgroups of the population. The debt brake enjoys greater support among high-income earners and among those well-informed about the future costs of deficit spending. People who do not trust politicians would like to see the government’s hands tied even more tightly. Opinions about the debt brake also differ markedly across the supporters of different political parties.     

军民融合背景下我国上市军工企业结构评价研究

采用“DEA方法”评价我国上市军工企业结构优化度,通过我国各军工产业结构优化效率之间的对比,探究我国军工产业结构现有的问题,进而提出新时期、新常态下,我国军工产业结构升级的对策。最后,就军民融合背景下我国军工企业转型升级问题提出实践性指导。     

我国财政专项转移支付决策过程分析--以多源流分析为视角

财政转移支付是1994年实行分税制以来平衡中央-地方以及区域间财力不均的制度，我国专项转移支付又始终占据着财政转移支付的重大比重。专项转移支付在确定资金转移地区，资金转移项目以及每个专项拨款多少的标准是如何确定的？这些都取决于专项转移支付的决策过程。文章通过多源流分析视角来探析我国财政专项转移支付的决策过程中存在的问题，了解我国财政专项转移支付的决策过程。     

The Hungarian twin crisis of 1931

Even though Germany, Austria, and Hungary experienced a major financial crisis simultaneously in 1931, of the three, only Germany's and Austria's episodes have been investigated in depth. This article offers a thorough assessment of the missing piece. It finds that, just like Germany, Hungary also experienced a twin crisis. The primary reason for the weakness of the financial sector was banks’ excessive exposure to agricultural loans. The fragility of the currency was the result of an early balance‐of‐payments crisis in 1928/9. The vulnerability of the banking and monetary systems culminated in a twin crisis in 1931.     

A method for estimating the volume of Baltic timber products exported through the Sound and its application to Portugal, 1669–1815

Abstract

In this article, the conventional wisdom on German trade policies during the interwar and the wartime years are examined from the Swedish experience. The conventional view, represented by, for instance, Hirschman, Child and Ellis, is that Germany adopted exploitative trade policies during the 1930s. By forcing bilateral agreements onto its smaller trading partners, the bargaining power was biased towards Germany's advantage – that is, Germany gained the market position of a monopolist-monopsonist. According to the conventional view, this was reflected in the cash flows, export and import prices and the commodity structure of the trade. In this article, German trade policies are analyzed with respect to the design and practice of the Swedish-German bilateral exchange clearing agreement; the commodity structure of the trade; and the price trends in Swedish-German bilateral trade. In the analyses, no evidence was found that would suffice to confirm the conventional view on German trade policies. Instead, it seems more likely that the Germans aimed for long-term cooperation, as has been claimed by, for instance, Milward, Neal and Ritschl. This does not mean that German trade policies were not exploitative, but since bilateral arrangement leveled the asymmetric power relations, Germany could not make use of its relatively stronger position.     

Making profits in wartime: corporate profits,inequality, and GDP in Germany during the First World War1

Making profits in wartime: corporate profits, inequality, and GDP in Germany during the First World War. This article reconsiders, and rejects, Kocka's (1973) hypothesis that a strong income redistribution from workers to capital owners occurred in Germany during the First World War. A small number of firms profited from the war, but the majority experienced a decline in real income, similar to the decline in workers' real wages. This finding also has important implications for the political history of the Weimar Republic. The authors also use their figures to improve German GDP estimates for the war period, since their sample makes it possible to estimate private service sector development. Economic indicators were worse for the war year of 1917 than previously believed.     

Marriage strategy among the European nobility

We use a unique dataset to analyze the marriage patterns of the British and German nobility from the 1500s to the 1800s, and discuss the differences in institutions between the two countries. Historical evidence shows that: nobles tended to marry nobles with identical title; and, German marriages were characterized by a higher degree of homogamy in titles than British marriages. Moreover, we show that German data exhibit lower odds of marriage than British among nobles and commoners, and hence provide evidence of a more stratified society. Finally, we propose a diff-in-diff exercise to test the correlation between highly restrictive marriage laws and marital sorting in Germany.     

Hunger games: or how the Allied blockade in the First World War deprived German children of nutrition,and Allied food aid subsequently saved them

At the onset of the First World War, Germany was subject to a shipping embargo by the Allied forces. Ostensibly military in nature, the blockade prevented not only armaments but also food and fertilizers from entering Germany. The impact of that blockade on civilian populations has been debated ever since. Germans protested that the Allies had wielded hunger as a weapon against women and children with devastating results, a claim that was hotly denied by the Allies. The impact of what the Germans termed the Hungerblockade on childhood nutrition can now be assessed using a newly discovered dataset based on heights and weights of nearly 600,000 German schoolchildren measured between 1914 and 1924. Statistical analysis reveals a grim truth: German children suffered severe malnutrition due to the blockade. Social class impacted risk of deprivation, with working‐class children suffering the most. Surprisingly, they were the quickest to recover after the war. Their rescue was fuelled by massive food aid organized by the former enemies of Germany, and delivered cooperatively with both government and civil society. The ability of former belligerents to work together after an exceptionally bitter war to feed impoverished children may hold hope for the future.     

Global and Euro Imbalances： China and Germany

We analyze global and euro area imbalances by focusing on China and Germany as large surplus and creditor countries. In the 2000s, domestic reforms expanded the effective labor force, restrained wages, shifted income toward profits and increased corporate saving. As a result, the Chinese and German current account surpluses widened, and that of Germany has proven more persistent, with subdued domestic investment. China is an early-stage creditor, holding a short equity position and a longposition in safe debt. Germany＇s balanced net debt and equity claims mark it as a mature creditor thatprovides insurance to the rest of the world. China pays to lay off equity risk, while Germany, by contrast, harvests a moderate yield on its net claims. In both economies, the shortfall of the net international investment position from cumulated current account surpluses arises from exchange rate changes, asymmetric valuation gains, and, in Germany＇s case, credit losses.     

Indonesia's Slow Economic Growth: 1981–86 1

The object of the paper is to explain the sharp decline in Indonesia's growth rate since 1981 compared with the period before 1981. It is argued that the slow growth of the later penod was mainly due to the net effect of investment, the government's domestic budget deficit and imports in depressing domestic demand, reflected in turn in a slower growth of money supply. These demand policies were followed to deal with the deteriorating balance of payments situation. Therefore, some alternative policies are suggested for dealing with this situation which will not have adverse effects on economic growth.     

Technology transfer via foreign patents in Germany, 1843–77

This article analyses the spread of innovation in mid‐nineteenth‐century Germany using foreign patents as an indicator for technology transfer. It introduces a new dataset of over 1,400 patents granted in the Grand Duchy of Baden between 1843 and 1877. The data show that Baden's technology import via foreign patents from German and non‐German inventors was important. This technology transfer was broadly based, although technologies related to the textile and machine‐building industries are prominent in the data. The decision to file a patent in Baden was driven by competition and the risk of imitation. Using a gravity model with city‐level data, we find evidence that technology transfer through patents reflected existing trade links. The strong correlation between technologies filed by foreigners and domestic inventors provides further evidence that the risk of imitation fostered patent‐based technology transfer during the mid‐nineteenth century. Furthermore, we show that foreigners filed patents predominantly in industries that accounted for a high share of the workforce in Baden.     

Interest payments and the stability of the government budget deficit in an open and growing economy

Summary This article discusses the basic determinants of stability and instability of the accumulation of public debt in an open and growing economy. Unlike most previous studies which start from the basically short term IS-LM framework, this analysis centers on the long-term dynamics arising from the government budget restraint, the balance of payments restraint and the interaction between growth and income distribution. Several policy regimes for the government's budget are taken into consideration and specific attention is paid to the question of whether monetary and fiscal policy can effectively ensure the stability of the system.Comments by W. Driehuis, S.K. Kuipers and H. Thoben are gratefully acknowledged.     

Navigating the trilemma: Capital flows and monetary policy in China

In recent years China has faced an increasing trilemma—how to pursue an independent domestic monetary policy and limit exchange rate flexibility, while at the same time facing large and growing international capital flows. This paper analyzes the impact of the trilemma on China's monetary policy as the country liberalizes its good and financial markets and integrates with the world economy. It shows how China has sought to insulate its reserve money from the effects of balance of payments inflows by sterilizing through the issuance of central bank liabilities. However, we report empirical results indicating that sterilization dropped precipitously in 2006 in the face of the ongoing massive buildup of international reserves, leading to a surge in reserve money growth.We also estimate a vector error correction model linking the surge in China's reserve money to broad money, real GDP, and the price level. We use this model to explore the inflationary implications of different policy scenarios. Under a scenario of continued rapid reserve money growth (consistent with limited sterilization of foreign exchange reserve accumulation) and strong economic growth, the model predicts a rapid increase in inflation. A model simulation using an extension of the framework that incorporates recent increases in bank reserve requirements also implies a rapid rise in inflation. By contrast, model simulations incorporating a sharp slowdown in economic growth such as that seen in late 2008 and 2009 lead to less inflation pressure even with a substantial buildup in international reserves.     

Indonesian Local Government Spending,Taxing and Saving: An Explanation of Pre‐ and Post‐decentralization Fiscal Outcomes*

As a result of Indonesia's decentralization program, local governments have gained significantly more responsibility for service delivery, considerably larger fiscal resources, and much greater authority over the use of those resources than before. The present paper develops a simple budget model to describe and explain the substantial differences in pre‐ and post‐decentralization local government fiscal behavior related to spending, taxing and saving. During the post‐decentralization period special attention is paid to the fiscal behavior of natural resource rich regions. Among other things, the evidence suggests that: post‐decentralization local government spending is partly responsive to increasing needs and partly the subject of elite capture; local government taxation has become more aggressive under decentralization and appears to be mostly driven by local bureaucratic expectations related to routine overhead budgets; and the increased savings of local governments during the post‐decentralization period is determined to a large degree by delayed central government transfer payments.