Economic stagnation in Weimar Germany: a structuralist perspective |
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| Institution: | 1. Faculty of Economics, Ritsumeikan University. 1-1-1, Noji-higashi, Kusatsu, Shiga, Japan;2. Department of Economics, University of Washington, Seattle, WA 98l95-3330, USA;1. Asia and Pacific Department, International Monetary Fund (IMF), USA;2. Department of Economics, University of California, Berkeley, USA;3. Peterson Institute for International Economics, NBER, USA;4. Department of Economics, Princeton University, USA |
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| Abstract: | Mexico and Argentina in the 1990s as well as Weimar Germany in the 1920s implemented similar exchange-rate-based stabilization programs which were successful in stopping inflation, but failed to generate the domestic savings and investment rates necessary for a sustainable growth path. It is argued that in both cases substantial foreign capital inflows were attracted by a stable nominal exchange rate and high interest rates, which alleviated the distributional struggle driving high inflation. However, this incentive structure caused a profit squeeze in the tradable goods sector due to an appreciating real exchange rate precipitating the ultimate collapse of the programs. |
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