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1815-1870 The CPI for the period 1815-1870 in the paper at hand builds on the CPI (nominal values) constructed and documented by Hansen (1983) in relation to his work on historical national accounts. The weights are based on non-published figures for the composition of the private consumption in 1840, and the price information is based on a collection of prices on a comprehensive selection of consumer goods. Hansen notes that many of the prices are wholesale prices from market places rather than actual retail prices. However, in many areas local retail stores did first emerge during this period.25 1870-1872 In his doctoral thesis at the University of Copenhagen Pedersen (1930) presents and document four different series for the cost of living in Denmark 1855-1913. The indices are based on budgets for different types of workers (skilled versus unskilled workers, urban versus farm workers). For the period 1870-1872 the development in the CPI data in the paper at hand is based on an unweighted geometric average of the percentage development in these four data series. The price material behind these series comes mainly from shops located in Odense, Aarhus and Varde supplemented with price information from departments of the Danish military located in Copenhagen, Odense, Aarhus and Næstved and from a large hospital in Copenhagen (Københavns Kommunehospital).

1872-1914 Statistics Denmark began publication of an “official” CPI for Denmark in 1914. However, on their website, Statistics Denmark presents a CPI for Denmark for the period 1900-1914. They have chosen the index compiled by Dalgaard (1926) who presents and document a retail price index for Denmark 1872-1924 based mainly on price information made available by staff at

Cf. page 370 in Hansen (1983).

Statistics Denmark. The weights used by Dalgaard are furthermore almost identical to the weights applied in the official CPI from 1914.

In order to be consistent with Statistics Denmark, the CPI data from 1872 to 1914 in the paper at hand is based on the index (excluding direct taxes) in Dalgaard, op.cit. The average annual CPI inflation implied by the figures in Dalgaard, op.cit., is 0.2 per cent for the period 1873-1913 which is equal to the average inflation level in the same period based on the cost of living series computed by Pedersen, op.cit..

1914-2007 Statistics Denmark began publication of an “official” CPI for Denmark in 1914, cf. the documentation in Statistics Denmark (1985, 2004). The index is a Laspeyres type index with occasionally changes weights. For the years 1914-1963 the original official CPI included direct taxes. However, on their website, Statistics Denmark presents a recalculated CPI excluding direct taxes for the period 1914-2007. The CPI data for the period since 1914 in the paper at hand are based on these figures.

Figure 1: Consumer price index for Denmark 1502-2007, 2000=100 0,1 0,01 Note: Semi-logarithmic scale.

Source: See text.

3. Price level and inflation in Denmark 1502-2007 – A brief review Figure 1 shows the CPI for Denmark 1502-2007 on a semi-logarithmic scale. The annual inflation rate in Denmark 1503-2007 (smoothed) is displayed in figure 2, whereas table 4 presents a range of summary statistics broken down by subperiods. Table 5 offers a closer look on selected war periods.

Figure 2: Annual consumer price inflation in Denmark 1503-2007, 15-years centred geometric moving average Per cent






-12 Source: See text.

–  –  –

Note: Semi-logarithmic scale.

Source: Denmark: Annex A; Norway: The website of Norges Bank (cf. Grytten (2004)); Sweden: The website of Sveriges Riksbank (cf. CPI2 in Edvinsson & Söderberg (2007) and Statistics Sweden); UK: Brown & Hopkins (1956) and IMF, International Financial Statistics, various issues.

Overall prices have risen by a factor of almost 4,100 since 1502. However, if one define price stability as an inflation rate around 2 per cent per annum, or lower, the past five centuries in Denmark has been dominated by price stability. The average inflation rate in the period 1503-2007 has only been 1.7 per cent per annum. There does not appear to have been a continuously rise in the price level, but rather some periods with price stability, other periods where prices fell, and some periods with a strong and more sustained inflation.

For the period 1503-1640 prices are measured in speciedaler with a fixed silver content.

The first part (1503-1539) was roughly characterised by price level stability in contrast to the second part (1540-1640) where the average annual inflation rate was 1.7 per cent. The same transition from price level stability to a positive inflation rate during the sixteenth century has also been found in many other European countries, including Norway26, Sweden27 and U.K28 and various European cities29, cf. also figure 3.

The period from the mid-1500s to the mid-1600s is usually termed the “Price Revolution” in the economic-historical literature. Traditionally the inflationary tendency during this period has been attributed to the inflow of precious metal from Central and South America, but it has been questioned whether this monetary factor was the only cause.30 Population growth after the Black Death is another frequently mentioned factor. Population appears to have increased substantially in many European countries during the second half of the sixteenth century and the first half of the seventeenth century. No solid data is available for Denmark but population seems also to have increased rapidly in regions close to Denmark, such as Norway and Schleswig-Holstein.31 The extraordinary rapid increase in the price level in Sweden from the mid-1500s to the mid-1600s in figure 3 was related to depreciation of the Swedish currency vis-à-vis silver (so-called coinage debasement, i.e. reduction in the silver content of the coins).32 The period 1540-1640 saw also several cases of major wars in Europe and Denmark, cf.

table 5. These wars might have had an influence on the price development.

However, the CPI for this period is only based on corn prices, which are highly dependent on variations in the weather conditions. The price effects from wars are therefore difficult to distinguish from the “normal” weather-related price shocks. Furthermore, it is possible that the war activities during this period mainly affected prices in selected regions rather than the country as a whole.

For the period 1641-1671 prices are measured in sletdaler (kroner). The average annual rate of inflation during this period was slightly negative (-0.7 per cent). However, during the Karl Gustav Wars against Sweden 1657-1660 the average annual inflation reached double-digit Cf. Grytten (2004) and Qvigstad (2005).

Cf. Edvinsson & Söderberg (2007).

Cf. Brown & Hopkins (1956) and Clark (2005).

Cf. e.g. Van Zanden (1999), Allen (2001) and Pamuk (2005).

Cf. e.g. the brief surveys in Kindleberger (1993) and Davies (2002).

Cf. page 84-85 in Hansen (1964).

Cf. page 12 in Edvinsson & Söderberg (2007).

figures. In the period 1641-1671 the average depreciation of kroner vis-à-vis silver amounted to around 0.4 per cent per annum.33 In the following period 1672-1813 prices are measured in kurantdaler. The period can be divided in two parts. During the first part (1672-1736) price level stability occurred, and there was only a modest depreciation of kurantdaler vis-à-vis silver.34 In the second part (1737-1807) the average annual rate of inflation was higher, around 1.4 per cent per annum. The first note-issuing bank within the Danish-Norwegian monarchy, Kurantbanken35, was established in 1736 and opened for business in 1737. The Kurantbank was not subject to any rules regarding the reserve backing of its bank notes issues, but its notes were redeemable on demand into silver coins. Convertibility of the Kurantbank notes was temporary suspended in 1745-1747 and again in 1757, this time de facto on a permanent basis. From 1760 more than half of the outstanding amounts of loans made by the Kurantbank were claims on the central government and in 1773 the Kurantbank was taken over by the central government. The silver parities implied a par exchange rate of 122.50 rigsdaler kurant per 100 rigsdaler banco36. During the period 1737-1782 the Danish exchange rate for Kurantbank notes vis-à-vis Hamburg banco fluctuated between 112 and 132. However from 1782 to 1787 the exchange rate depreciated from 132 to 141, which initiated a reorganisation of the Danish monetary system. The reorganisation was first implemented in the Royal Duchies Schleswig and Holstein. In 1788 the note issuing Schleswig-Holstein Specie Bank was founded as a governmental institution in Altona. It took over the responsibilities of the Kurantbank in the Royal Duchies Schleswig and Holstein whereby Schleswig-Holstein became a separate currency area within the Danish monarchy. The Kurantbank notes continued to depreciate and reached a level of 162 rigsdaler kurant per 100 rigsdaler banco in

1789. Part of the reason was probably that a large amount of the Kurantbank notes withdrawn from the Royal Duchies was not destroyed but re-circulated in Denmark-Norway. A new note-issuing bank for Denmark-Norway, the Danish-Norwegian Specie Bank, was established in Copenhagen in 1791.37 Its notes and coins were based on the speciedaler whereby the monetary unity within the Danish monarchy was restored. In 1794 the Kurantbank notes returned to par vis-à-vis Hamburger banco.

During the years 1808-1813 Denmark experienced a state of actual hyperinflation with an average inflation around 80 per cent per annum. The background was huge centralCalculated on the basis of Wilcke (1924).

In the period 1672-1736 the average depreciation of kurantdaler vis-à-vis silver amounted to around 0.3 per cent per annum calculated on the basis of Friis & Glamann (1958) and Wilcke (1929).

The official name of the bank was “Den Kiøbenhavnske Assignation-, Vexel- og Laane-Banqve”. The history of the Kurantbank is covered by Rasmussen (1950, 1955).

The Hamburg banco was not a coin but simply a specifically defined amount of fine silver.

government budget deficits due to large war expenditures and lower tax revenue. The budget deficits were financed by the issuing of kurant-denominated bank notes, which caused a massive drop in the silver value of the kurantdaler, cf. figure 4 and section 2.

Figure 4: CPI inflation and currency depreciation 1800-1815, 1800=100

–  –  –

Note: Semi-logarithmic scale. Annual averages. An increase in the currency index describes a depreciation vis-à-vis silver.

Source: Page 254 in Wilcke (1929); page 420-424 in Rubow, A. (1918); and annex A.

The price volatility was significantly smaller in the period 1712-1800 than during the preceding periods. A contributing factor is that the price index for the period 1712-1800 is based on a broad range of consumer products and not only corn.

The decades following Napoleonic wars were characterised by deflation. The central bank focused on withdrawing bank notes in order to increase the silver value of the currency, and parity of the rigsbankdaler notes vis-à-vis silver coins was achieved in 1838. The rest of the Silver Standard period (1839-1874) and the Classical Gold Standard period (1875-1913) were dominated by price level stability, cf. table 4.

During the First and Second World War inflation rose to a level significantly higher than the average – although to levels far less than during the Napoleonic wars – whereas the interwar period on average saw a mild deflation.

In a historical perspective the development during the first four decades following the Second World War stands out as an exception with an average inflation rate significant above At the same time the Kurantbank was closed for new business activities. The circulating amount of Kurantbank notes was not to be increased, and the Kurantbank notes were planned to be gradually withdrawn from circulation the historical mean even though the country was not in a state of war. The last two decades, inflation has again reached an average around 2 per cent per annum. From table 4 one can also notice that the post-World War II period has only witnessed a few years with a drop in the consumer price level whereas deflation frequently occurred during the preceding four and a half century except in actual war periods.

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