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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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Off Gold and Back Again: Finnish and Swedish Monetary Policies1914–1925

Off Gold and Back Again: Finnish and Swedish Monetary Policies1914–1925

Chapter:
(p.237) 8 Off Gold and Back Again: Finnish and Swedish Monetary Policies1914–1925
Source:
Banking, Currency, and Finance in Europe Between the Wars
Author(s):

Tarmo Haavisto

Lars Jonung

Publisher:
Oxford University Press
DOI:10.1093/0198288034.003.0009

Sweden went back to gold at the pre‐war parity, whereas Finland returned at the existing rate, accepting the depreciation of the markka that had occurred over the war and early post‐war years. The authors use a quantity‐theory framework to investigate the results of the divergent exchange rate and monetary policies followed by the two countries. The Swedish economy was forced to undergo a severe contraction, while Finland escaped the need for such an adjustment at the cost of a higher rate of inflation, and enjoyed a post‐war boom on the basis of its devalued currency. However, this was not the result of a deliberate choice on the part of the Finnish authorities: it was rather that the central bank lacked the resources needed to support the markka.

Keywords:   boom, central bank, contraction, depreciation, exchange rate, Finland, inflation, monetary policy, quantity theory, Sweden

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