Arbeitspapier
Transfer Problem Dynamics: Macroeconomics of the Franco-Prussian War Indemnity
We study the classic transfer problem of predicting the effects of an international transfer on the terms of trade and the current account. A two-country model with debt and capital allows for realistic features of historical transfers: they follow wartime increases in government spending and are financed partly by borrowing. The model is applied to the largest historical transfer, the Franco-Prussian War indemnity of 1871-1873. In these three years, France transferred to Germany an amount equal to 22 percent of a year's GDP. When the transfer is combined with measured shocks to fiscal policy and a proxy for productivity shocks over the period, the model provides a very close fit to the historical sample paths of French GDP, terms of trade, net exports, and aggregate consumption. This makes a strong case for the dynamic general equilibrium approach to studying the transfer problem.
- Language
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Englisch
- Bibliographic citation
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Series: Queen's Economics Department Working Paper ; No. 1025
- Classification
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Wirtschaft
Current Account Adjustment; Short-term Capital Movements
Open Economy Macroeconomics
Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Europe: 1913-
- Subject
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transfer problem
current account
terms of trade
- Event
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Geistige Schöpfung
- (who)
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Devereux, Michael B.
Smith, Gregor W.
- Event
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Veröffentlichung
- (who)
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Queen's University, Department of Economics
- (where)
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Kingston (Ontario)
- (when)
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2005
- Handle
- Last update
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10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Devereux, Michael B.
- Smith, Gregor W.
- Queen's University, Department of Economics
Time of origin
- 2005