Hyperinflation after the First World War in Central Europe: Causes, Remedies, Consequences

The paper examines in detail Germany and Poland, two of the four post-First World War hyperinflations that provided the subject of Thomas Sargent’s classic comparative study of the circumstances in which inflations might be ended. It counterposes the Czechoslovak case, where stabilisation occurred without prior hyperinflation. Stabilisation brought substantial costs, most obviously in terms of recession and unemployment. The peripheral inflating countries had sought to use inflation to effect an international as well as an internal redistribution of wealth. Ending the inflation was thus politically costly, and usually involved ceding some aspect of sovereignty or limiting the room for domestic political manoeuvre. Hence many inflations were not really ended, but produced premature celebrations before a relapse, accompanied by a move against external control.