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The Economic Consequences of the Franc Poincare

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  • Eichengreen, Barry
  • Wyplosz, Charles

Abstract

Following the fiscal stabilisation of 1926 and the accompanying return of the French franc to the Gold Standard, France enjoyed several years of fast growth and remained immune to the effects of the Great Depression until early 1931. Accounts of this period emphasize the undervaluation of the Franc Poincare of 1926 and the attendant export-led recovery. The undervaluation of the franc, in turn, is largely related to monetary policy. We show that exports cannot account for the delayed onslaught of the Great Depression and identify investment as the proximate driving force. We also claim that fiscal policy played a major role explaining simultaneously the undervaluation of the franc and the investment boom. The paper presents a dynamic model of fiscal policy as well as supporting empirical evidence.

Suggested Citation

  • Eichengreen, Barry & Wyplosz, Charles, 1986. "The Economic Consequences of the Franc Poincare," CEPR Discussion Papers 136, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:136
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    Cited by:

    1. Muriel Dal-Pont Legrand & Dominique Torre, 2014. "Pierre Quesnay (1895-1937) from the League of Nations to the Franc Poincaré: Financial Discipline and Monetary Pragmatism," GREDEG Working Papers 2014-43, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Eichengreen, Barry & Portes, Richard, 1986. "The Anatomy of Financial Crises," CEPR Discussion Papers 130, C.E.P.R. Discussion Papers.
    3. Bridji, Slim, 2013. "The French Great Depression: A business cycle accounting analysis," Explorations in Economic History, Elsevier, vol. 50(3), pages 427-445.
    4. Pierre Villa, 1996. "France in the Early Depression of the Thirties," Working Papers 1996-06, CEPII research center.
    5. Harold James, 1992. "Financial flows across frontiers during the interwar depression," Economic History Review, Economic History Society, vol. 45(3), pages 594-613, August.

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