Question
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
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. In1929, economists John Maynard Keynes and Bertil Ohlin had a spirited debate in theEconomic Journalover the possibility that the transfer payment would impose a "secondary burden" on Germany by worsening its terms of trade.
Considering different economic theories, how would permanent transfers of country A to Country B affect the real exchange rate in the long run between the two?
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