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Spoils of War: The Political Legacy of the German hyperinflation

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  • Galofré-Vilà, Gregori

Abstract

I study the link between monetary policy and electoral outcomes by linking new data on the 1923 German hyperinflation and the vote share of the main parties of Weimar Republic from 1924 to 1933. Exploiting cross-sectional variation in prices in over 280 cities, I find that inflation predicts the vote share of the Volksrechtspartei, an association-turned-party of inflation victims, and positively correlates with the Communists in the 1932 elections. Hyperinflation also leads to a decline in turnout, with a loss of confidence in the German institutions. However, contrary to received wisdom, areas more affected by inflation did not see a higher vote share for the Nazi party. Results are robust to a range of specifications, including models in differences, panel data with fixed effects, Coarsened Exact Matching estimation, Conley standard errors, and an instrumental variable strategy.

Suggested Citation

  • Galofré-Vilà, Gregori, 2023. "Spoils of War: The Political Legacy of the German hyperinflation," Explorations in Economic History, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:exehis:v:88:y:2023:i:c:s0014498322000572
    DOI: 10.1016/j.eeh.2022.101479
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    More about this item

    Keywords

    Hyperinflation; Monetary policy; Populism; Nazis;
    All these keywords.

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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