Monetary Policy Without Interest Rates: Evidence from France 's Golden Age (1948-1973) Using a Narrative Approach

European Historical Economics Society (EHES) Working Paper No. 32

77 Pages Posted: 12 Sep 2013

See all articles by Eric Monnet

Eric Monnet

Banque de France; Paris School of Economics (PSE)

Date Written: December 2012

Abstract

Central banking in France from 1948 to 1973 was a paradigmatic example of an unconventional policy relying on quantities rather than on interest rates. Usual SVAR find no effect of policy shocks and support the common view that monetary policy was ineffective over this period. I argue that only a narrative approach is able to account for the peculiarity and complexity of quantitative controls on money and credit. Using archival evidence, I measure monetary policy stance with a dummy variable denoting restrictive episodes. Impulse response functions then show standard patterns; monetary policy shocks have a strong and long lasting effect. These results offer a revisionist account of postwar monetary policy under Bretton Woods and before the Great Inflation. They also suggest that quantities of money and credit can play a greater role than their prices in the adjustment process of the economy.

Keywords: monetary policy, credit controls, VAR, narrative approach, liquidity puzzle, Banque de France , Bretton Woods

JEL Classification: N14, E31, E32, E51, E52, E58

Suggested Citation

Monnet, Eric, Monetary Policy Without Interest Rates: Evidence from France 's Golden Age (1948-1973) Using a Narrative Approach (December 2012). European Historical Economics Society (EHES) Working Paper No. 32, Available at SSRN: https://ssrn.com/abstract=2324153 or http://dx.doi.org/10.2139/ssrn.2324153

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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