Money, Credit and the Wage-Price Spiral in Post-World War I Germany

This chapter empirically examines the channels by which conflicting income claims exerted upward pressure on the money supply during the great post-World War I inflation in Germany. Such an investigation seems long overdue for two reasons. First, the nature of the money supply process remains a crucial issue in econometric analyses of the German hyperinflation. Its importance stems not only from the direct link between the money supply and the price level but also from the role of increased inflationary expectations – hence acceleration of velocity – in explaining why inflation exceeded money growth during the hyperinflationary period (Cagan, 1956).