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Monetary and Fiscal Unification in Nineteenth-Century Germany: What Can Kohl Learn from Bismarck? Harold James Essays in International Finance No. 202
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| This essay examines the context and consequences of German monetary unification during the 1870s. The creation of a new central bank in a federal setting was politically highly controversial and was accompanied by a struggle between the states for influence on banking policy. The Reichsbank remained constantly the subject of political debates, but its activities proved economically stabilizing (until World War I). In contrast, the failure to devise fiscal rules during the 1870s led to growing difficulties in making budget policy. Central taxes did not work as an automatic stabilizer. The final section of the essay discusses the influences of the German experience on current attitudes to European Economic and Monetary Union and parallels and contrasts between German and European monetary unification. |
