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7 - The Bank of Poland and Monetary Policy during the Interwar Period

from Part II - Specific

Published online by Cambridge University Press:  02 November 2023

By
Cecylia Leszczyńska
Edited by
Barry Eichengreen  and
Andreas Kakridis
Barry Eichengreen
Affiliation:
University of California, Berkeley
Andreas Kakridis
Affiliation:
Bank of Greece and Panteion University, Athens
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Summary

Like other developing countries, Poland based its interwar monetary policy on the gold exchange standard. Following a bout of hyperinflation , Władysław Grabski’s 1924 reform led to the establishment of the Bank of Poland. Early efforts to return to the gold standard, however, were not entirely successful. In 1925, an economic crisis weakened the zloty dramatically, before futher monterary reforms were introduced in 1927. Post-war monetary instability made Poland reluctant to abandon the gold standard after 1929 and foreign exchange controls were first introduced as late as 1936. The central banks reluctance to abandon the gold standard contributed to the depth and persistence of the Great Depression in Poland. The chapter thus reveals the challenges faced by a newly-formed country lacking adequate reserves and a financial track record to stabilise its currency; it also points to the path dependent nature of interwar monetary policy: the hyperinflation of 1919-23 and the crisis of 1925 created the belief that any easing of monetary policy would trigger an inflationary spiral. When the Great Depression struck, exchange rate stability trumped all other macroeconomic and financial policy objectives.

Keywords

Polandcentral bankhyperinflationgold exchange standardBank of Poland (Bank Polski)monetary policyinterwar
Type
Chapter
Information
The Spread of the Modern Central Bank and Global Cooperation
1919–1939
 , pp. 160 - 196
Publisher: Cambridge University Press
Print publication year: 2023

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