The economic consequences of Mr. Volpi: an analysis of ‘quota 90’

The revaluation of the lira against the pound, the so-called ‘quota 90’, was a major economic policy decision taken by the fascist government in 1926. The economic history literature has seen this policy as the domestic implementation of the return to the Gold Exchange Standard, which characterized the interwar period, with relatively limited economic consequences. We analyze the effects of ‘quota 90’ through a Vector Error Correction Model and find that the economic cost in terms of output was limited. Granger-causality tests point toward wages reacting to changes in the terms of trade, which is consistent with the historical evidence of wage moderation as a result of labor market reforms that tilted the balance in favor of the firms.