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At the end of World War I the Treaty of Versailles imposed an indemnity on Germany a large annual payment from it to the victorious Allies Many historians believe this indemnity played a role in

At the end of World War I, the Treaty of Versailles imposed an indemnity on Germany, a large annual payment from it to the victorious Allies. Many historians believe this indemnity played a role in destabilizing financial markets in the inter-war period and even in bringing on World War II (given more time, it would have been nice to read some excerpts from Keynes' The Economic Consequences of the Peace, published in 1919). In 1929, economists John Maynard Keynes and Bertil Ohlin had a spirited debate in the Economic Journal over the possibility that the transfer payment would impose a "secondary burden" on Germany by worsening its terms of trade. Use the theory developed in your reading of our textbook (and other sources, should you choose to venture out) to discuss the mechanisms through which a permanent transfer from Poland to the Czech Republic would affect the real zloty/koruna exchange rate in the long run.

Feb 06 2020 View more View Less

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