The French Monetary Management in the Inter-war Period: the Dismissal of Open Market Procedure?

The notion of rule surrounded the gold standard system. For instance, it is not seldom to present the gold standard system under the 1925 Keynesian expression as the rules of the game. However, it is nowadays quite crystal clear that gold standard system was not such a self regulating system in which automatic rules prevailed (Eichengreen 1996; Mouré 2001). At the same time, the behaviour of the French bank of issue in the inter-war period gave rise to polemic (Nurkse 1944). The paper proposes to examine the conduct of the French monetary management in the inter-war period by focusing on the context and behaviour adopted by Bank of France. Three points emerge from the study. (1) Before explaining the way franc was managed, we need to make a short recall on the state of the French economy after WWI and on the way the French banker system functioned. (2) The monetary management implemented by the Bank of France is both characterized by a discount rate policy and by the total rejection of open-market operations. This way of managing the franc can be explained by the French historical background and by the conflict between the two leading economists of the moment: C.Rist and P.Quesnay. (3) In order to illustrate the French monetary policymaking the paper will expose the peculiar policy implemented by Bank of France between 1928 and 1932. This way of behaving -based on the gold gathering at the expense of the other countries- was roughly criticized in Europe since France was accused of being responsible of the 1930's international depression.