INFLATIONARY EXPECTATIONS AND UNCERTAINTY DURING THE GREAT DEPRESSION IN GERMANY

The unusual severity of the Great Depression in Germany has often been interpreted as a unique failure of economic policy – with disastrous consequences for the Weimar republic. In this paper, we argue that criticisms of the Brüning government are misplaced. On the basis of asset prices, we infer that fear of inflation was widespread in 1931 / 32, limiting the room for manoeuvre. We conclude that the Britain's departure from gold – instead of facilitating such a step in Germany – actually made it much more difficult to adopt expansionary measures, because it increased uncertainty and fear of inflation