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

Author

Listed:
  • 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.

Suggested Citation

  • Philippe, LEDENT & Isabelle, CASSIERS, 2006. "Learning to manage external constraints : Belgian monetary policy during the Bretton Woods era (1944-1971)," Discussion Papers (ECON - Département des Sciences Economiques) 2006032, Université catholique de Louvain, Département des Sciences Economiques.
  • Handle: RePEc:ctl:louvec:2006032
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2006-32.pdf
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    References listed on IDEAS

    as
    1. Britton,Andrew, 2001. "Monetary Regimes of the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521801690, March.
    2. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

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

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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