TY  - JOUR
AU  - Grossman,Herschel I.
TI  - The Political Economy of War Debts and Inflation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2743
PY  - 1990
Y2  - September 1990
UR  - http://www.nber.org/papers/w2743
L1  - http://www.nber.org/papers/w2743.pdf
N1  - Author contact info:
Herschel Grossman
Department of Economics
Box B
Brown University
Providence, RI  02912
Tel: 401/863-2606
Fax: 401/863-1970
AB  - This paper argues that before World War II the desire to maintain a trustworthy reputation for honoring war debts was an important factor in inducing deflationary postwar monetary policies in both the United Kingdom and the United States. The paper then asks why this policy objective did not serve to induce either a deflationary monetary policy or the honoring in full of war debts following World War II. The discussion focuses on differences in economic and political conditions after World War II, especially the extension of the voting franchise, the increased economic and political power of organized labor, and, perhaps most importantly, the large postwar demands on national resources with which the servicing of World-War-II debts had to compete. The analysis also argues that, because these postwar developments were unforeseeable, but verifiable, contingencies, the partial default on World-War-II debts was excusable and, accordingly, did not cause either the United Kingdom or the United States to lose its trustworthy reputation.
ER  -