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Threat of a capital levy, expected devaluation and interest rates in France during the interwar period

Published online by Cambridge University Press:  07 September 2006

Pierre-Cyrille Hautcoeur  and
Pierre Sicsic
Pierre-Cyrille Hautcoeur
Affiliation:
DELTA, Ecole Normale Supérieure, 48 Bd Jourdain, Paris 75014, France
Pierre Sicsic
Affiliation:
Banque de France, 39 Rue Croix des Petits Champs, Paris 75001, France
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Abstract

In this paper we try to isolate and measure the respective importance of political and economic aspects in two critical episodes of France interwar. We do this by separating expectations of taxation and of devaluation that are implicitly included in the prices of various categories of French and foreign bonds. Concerning the 1924–26 crisis, we show first that there was no expectation of a government default; second that the rise of interest rates in 1925 results from expectations of a capital levy; third that no hyperinflation was ever expected. After stabilisation, we show that the markets expected an appreciation of the franc up to 1931 and a devaluation afterwards.

Type
Articles
Information
European Review of Economic History , Volume 3 , Issue 1 , April 1999 , pp. 25 - 56
Copyright
Cambridge University Press 1999

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