Spoils of War: The Political Legacy of the German hyperinflation |
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| Affiliation: | 1. Knoxville, TN, United States;2. Evanston, IL, United States;3. Odense, Denmark;1. Centre for Mathematical Sciences, Lund University, Lund, Sweden;2. Department of Economic History, Lund University, Lund, Sweden;1. TU Dortmund University, Germany, CEPR, UK;2. WU Vienna University of Economics and Business, Austria, CEPR, UK;3. University of Southern Denmark, Denmark, CAGE, UK, CEPR, UK;1. National University of Singapore, CEPR, and NBER, 1 Arts Link, 117568, Singapore;2. Simon Fraser University, 8888 University Dr W, Burnaby, BC V5A 1S6, Canada;3. University of Tokyo and NBER, 7 Chome-3-1 Hongo, Bunkyo City, Tokyo 113-0033, Japan |
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| Abstract: | I study the link between monetary policy and electoral outcomes by linking new data on the 1923 German hyperinflation and the vote share of the main parties of Weimar Republic from 1924 to 1933. Exploiting cross-sectional variation in prices in over 280 cities, I find that inflation predicts the vote share of the Volksrechtspartei, an association-turned-party of inflation victims, and positively correlates with the Communists in the 1932 elections. Hyperinflation also leads to a decline in turnout, with a loss of confidence in the German institutions. However, contrary to received wisdom, areas more affected by inflation did not see a higher vote share for the Nazi party. Results are robust to a range of specifications, including models in differences, panel data with fixed effects, Coarsened Exact Matching estimation, Conley standard errors, and an instrumental variable strategy. |
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