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Monetary Regimes and Inflation

History, Economic and Political Relationships

Peter Bernholz

This book explores the characteristics of inflations, comparing historical cases from Roman times up to the modern day. High and moderate inflations caused by the inflationary bias of political systems and economic relationships – and the importance of different monetary regimes in containing them – are analysed.
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Chapter 2: Inflation and Monetary Regimes

Peter Bernholz


1 2.1 INFLATIONS: LONG-TERM HISTORICAL EVIDENCE We turn first to the long-term development of inflation since about 1800 in several countries belonging for decades to the most highly developed economies of the world (Figure 2.1). On the vertical axis the logarithm of the cost of living index, CPI, is depicted, whereas time is denoted on the horizontal axis. We have used the logarithm of CPI since CPI itself would not fit on the page. As we can see from the figure, the price levels of the United States, Great Britain, France and Switzerland do not show an upward or downward trend 1790 = 2 4.8 4.3 ln(CPI) 3.8 3.3 2.8 2.3 1.8 1750 1810 1830 1850 1870 1890 1910 1930 1950 1970 1990 1790/92 1913/14 1998 Year GB France Switzerland USA Sources: Mitchell (1976), pp. 735–47. Statistisches Bundesamt (1981), pp. 704–6. US Bureau of the Census (1976), Historical Statistics of the United States: Colonial Times to 1970. Bicentennial Edition. Statistisches Bundesamt (2000), pp. 230f. Figure 2.1 Development of cost of living indices in four countries (logarithms) 3 4 Monetary regimes and inflation 2600 2100 %, 1950 = 100 1600 1100 600 100 1950 1960 1965 1970 1975 1980 1985 1990 1995 2000 Year (West) Germany France Switzerland Italy USA See Figure 2.1. GB Sources: Figure 2.2 Development of cost of living indices in six countries, 1950–2000 before 1914, but only long-term swings. The situation changes, however, after 1914 and at least from 1930, since a pronounced upward trend,...

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