Fiscal Deficits, Interest Rates and Monetary Policy in West Germany

  • Manfred Willms
Part of the Studies in Banking and International Finance book series (SBIF)


In post-war West Germany for a long period of time public debt and fiscal deficits were of negligible magnitude. Government debt related to war-financing had been almost completely cancelled by the currency reform of 1948, and the new constitution required a balanced budget. Debt financing was only allowed for investment purposes. Accordingly, public debt grew at very moderate rates and was mainly issued by local governments. In order to stimulate private capital formation, the federal and the state budgets were in a surplus position for many years.


Interest Rate Monetary Policy Central Bank Public Expenditure Public Debt 
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© Donald R. Hodgman and Geoffrey E. Wood 1989

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  • Manfred Willms

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