Deflation and Recession in France in the (Seventeen) Twenties

This paper studies a remarkable experiment in monetary policy. Because of the peculiarity of the French monetary system, the government was able to engineer overnight appreciations of the currency in terms of silver of 100% over a few months, with the explicit goal of lowering the price level. Instead, a sharp recession resulted, which I document using biannual data on woollen production across France, as well as data on volume of transactions and commercial interest rates from regional fairs. The failure of prices and wages to adjust to the currency appreciation was attributed at the time to expectations of further appreciations which led agents to hoard goods and drive up prices