Evolution of economic thought on monetary reform in the Kingdom of Serbs, Croats and Slovenes after the Great War

Abstract

This paper analyses the opinions of economists and policy makers on the monetary reform undertaken in the Kingdom of SCS after the Great War. The purpose of the analysis is to show how those opinions evolved in the situation of growing monetary instability. Immediately after the war it was believed that the pre-war gold parity of the national currency could be restored but, after several years burdened with the depreciation of the dinar and inflation, it became clear that monetary stabilization needed a new realistic approach. The opinions on this approach ranged from extremely regulatory to completely liberal ones. Early commitment to administrative measures was more the consequence of an extremely delicate and changing economic and political situation in which the State was in the early 1920s than renunciation of the liberal economic policy pursued in the Kingdom of Serbia before the Great War. When it became clear that the implementation of palliative administrative measures could not prevent the value of the dinar from falling, a pragmatic liberal approach prevailed. The major proponent of this approach among economists was Velimir Bajkic, and among policy makers, Finance Minister Milan Stojadinovic and the Governor of the National Bank of the Kingdom of SCS Djordje Vajfert.