Financing a Planned Economy: Institutions and Credit Allocation in the French Golden Age of Growth (1954-1974)

Berkeley Economic History Laboratory Working paper (BEHL) Working Paper WP2013-02

72 Pages Posted: 31 Aug 2013

See all articles by Eric Monnet

Eric Monnet

Banque de France; Paris School of Economics (PSE)

Date Written: February 5, 2013

Abstract

The role of banking and finance in the Golden Age of European growth (1950-1973) is very little known and widely underestimated. This paper studies the French system of economic planning and investment-based strategy that enhanced medium and long-term financing (called "investment credit" at that time). First, I describe the new institutions that were built after WWII to organize credit allocation. I especially highlight the role of the central bank through the National Credit Council. I then use a newly constructed database that matches the amount of credit (that had to be registered at the Banque of France) in 49 sectors to corporate tax sectoral statistics. It shows a significant positive relationship between investment credit and the marginal product of capital. The allocation of medium/long-term credit managed to favor the allocation of productive capital across sectors and thus to ensure the catch-up process. Using GMM estimations in order to deal with endogeneity, I find that the effect of "investment credit" on growth is significant and positive, contrary to short-term credit which did not play any role for investment. Understanding the institutional framework that shaped the mechanisms and success of credit policy in the French mixed economy during the 50s and 60s also helps to understand its failures during the mid-70s.

Keywords: French planning, Banque de France, credit policy, catch-up growth, financial repression, coordinated capitalism

JEL Classification: E44, E58, G18, G28, N14, O16, O21, P11

Suggested Citation

Monnet, Eric, Financing a Planned Economy: Institutions and Credit Allocation in the French Golden Age of Growth (1954-1974) (February 5, 2013). Berkeley Economic History Laboratory Working paper (BEHL) Working Paper WP2013-02 , Available at SSRN: https://ssrn.com/abstract=2318396 or http://dx.doi.org/10.2139/ssrn.2318396

Eric Monnet (Contact Author)

Banque de France ( email )

Paris
France

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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