Scylla and Charybdis: the European economy and Poland's adherence to gold, 1928-1936

Wolf, Nikolaus (2007) Scylla and Charybdis: the European economy and Poland's adherence to gold, 1928-1936. CEPDP (834). London School of Economics and Political Science. Centre for Economic Performance, London, UK. ISBN 9780853282099

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Abstract

This paper examines the timing of exit from the gold-exchange standard for European countries based on a panel of monthly observations 1928-1936 for two purposes: first it aims to understand the enormous variation in monetary policy choices across Europe. I show that the pattern of exit from gold can be understood in terms of variation in factors commonly suggested in the theoretical literature, which makes it possible to predict with reasonable accuracy the very month when a country will exit gold in the 1930s. Second, I analyse the case of Poland more closely because it appears to be an intriguing outlier. Poland did not leave gold until April 1936 and suffered through one of the worst examples of a depression, with massive deflation and a complete collapse of industrial production. The estimated model fares worst for Poland, and predicts an exit even later than April 1936. By closer inspection, the factors that drive this prediction are the non-democratic character of the regime and a surprisingly high degree of trade integration with France. I argue that Poland’s monetary policy was determined by attempts of the Piłsudski regime to defend Poland against foreign (esp. German) aggression. I provide evidence that strongly supports this view until about mid-1933. Ironically, just when Poland had joined the gold-bloc there were signs of a broad strategic reorientation, which paved the way for an exit in 1936.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2007 Nikolaus Wolf
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions D History General and Old World > D History (General)
JEL classification:	E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E42 - Monetary Systems; Standards; Regimes; Government and the Monetary System N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N14 - Europe: 1913-
Date Deposited:	18 Jul 2008 13:53
Last Modified:	13 Sep 2024 20:02
URI:	http://eprints.lse.ac.uk/id/eprint/19659

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