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Banking, Currency, and Finance in Europe Between the Wars$
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Charles H. Feinstein

Print publication date: 1995

Print ISBN-13: 9780198288039

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198288034.001.0001

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Exchange‐Rate Policy and Macroeconomic Performance: A Comparison of French and Italian Experience Between the Wars

Exchange‐Rate Policy and Macroeconomic Performance: A Comparison of French and Italian Experience Between the Wars

Chapter:
(p.187) 6 Exchange‐Rate Policy and Macroeconomic Performance: A Comparison of French and Italian Experience Between the Wars
Source:
Banking, Currency, and Finance in Europe Between the Wars
Author(s):

Jean‐Charles Asselain

Alain Plessis

Publisher:
Oxford University Press
DOI:10.1093/0198288034.003.0007

France and Italy both stabilized their currencies relatively late. Although the French franc was initially undervalued and the lira overvalued, there were significant similarities in subsequent developments. Both countries remained on the gold standard after the departure of Britain in 1931, and both were eventually forced to devalue after a difficult period of deflation in the mid‐1930s. This study examines the effects of these decisions on trade and growth in the two countries. Italy was more successful than France in holding down the rate of inflation and also achieved a more rapid rate of economic growth. The authors attribute this primarily to the ability of the Fascist dictatorship to impose a consistent policy on the Bank of Italy and the commercial banks, to maintain effective exchange controls, and to enforce wage reductions on the labour force.

Keywords:   banks, deflation, devaluation, economic growth, exchange controls, Fascism, France, gold standard, Italy, wage reductions

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