International Economics and Domestic Politics: Notes on the Twenties

There were radical differences in post‐war exchange‐rate regimes, and associated monetary and fiscal policies. Some countries accommodated moderate inflation by abandoning their pre‐war gold parities; others subjected themselves to painful deflation in order to restore gold convertibility at the pre‐war rates. Major policy differences were again evident in response to the Great Depression, with some eagerly abandoning the gold standard, others seeking at all costs to preserve it. To explain these differences, Eichengreen and Simmons investigate the relationship between economic policy and domestic political systems. They find that countries with independent central banks, more stable governments, larger governing majorities, and, more surprisingly, left‐wing parliamentary majorities were better able to resist currency depreciation in the 1920s