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Learning to manage external constraints : Belgian monetary policy during the Bretton Woods era (1944-1971)

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  • Philippe, LEDENT

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

  • Isabelle, CASSIERS

Abstract

This paper analyses the Belgian monetary and exchange rate policies at the time of Bretton Woods. It sheds light on the groping adjustment process by which internal economic policies are hit by or adapt to the external constraints. In 1944, an ambitious monetary reform laid down the economic policy objectives that remained in force for two decades, namely price stability and strong currency. However, we point out different incompatibilities between these objectives and the economic context of the 1950s and 1960s that could have negative consequences on Belgian economic growth?. More precisely, the long lasting European currencies inconvertibility (1944-1958) contradicted the orthodox approach of the monetary policy favoured by the Central Bank. When total convertability was finally achieved, the huge increase of capital movements led to a progressive loss of the monetary policy autonomy, despite the setting up of a two-tier exchange market, which can be viewed as an institutional innovation responding to new constraints.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2006032.

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Length: 27
Date of creation: 01 Sep 2006
Date of revision:
Handle: RePEc:ctl:louvec:2006032

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Related research

Keywords: Monetary policy; Bretton Woods; Currency inconvertibility; Capital movements; Two-tier exchange market;

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  1. Alessandra Casella & Barry Eichengreen, 1991. "Halting Inflation in Italy and France After World War II," NBER Working Papers 3852, National Bureau of Economic Research, Inc.
  2. Britton,Andrew, 2001. "Monetary Regimes of the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521801690.
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