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Monetary policy without interest rates. Evidence from France’s Golden Age (1948-1973) using a narrative approach

  • Eric Monnet

    ()

    (Paris School of Economics)

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.

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File URL: http://ehes.org/EHES_No32.pdf
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Paper provided by European Historical Economics Society (EHES) in its series Working Papers with number 0032.

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Length: 75 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:hes:wpaper:0032
Contact details of provider: Web page: http://www.ehes.org

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  1. van Wijnbergen, Sweder, 1983. "Credit policy, inflation and growth in a financially repressed economy," Journal of Development Economics, Elsevier, vol. 13(1-2), pages 45-65.
  2. repec:cup:cbooks:9780521882026 is not listed on IDEAS
  3. Stefano Battilossi & James Foreman-Peck & Gerhard Kling, 2008. "European business cycles and economic policy, 1945-2007," Working Papers in Economic History wp08-13, Universidad Carlos III, Instituto Figuerola de Historia y Ciencias Sociales.
  4. Gerald Carlino & Robert Defina, 1998. "The Differential Regional Effects Of Monetary Policy," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 572-587, November.
  5. Leeper, Eric M. & Gordon, David B., 1992. "In search of the liquidity effect," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 341-369, June.
  6. Bagliano, Fabio C. & Favero, Carlo A., 1998. "Measuring monetary policy with VAR models: An evaluation," European Economic Review, Elsevier, vol. 42(6), pages 1069-1112, June.
  7. Carmen M. Reinhart & M. Belen Sbrancia, 2011. "The Liquidation of Government Debt," NBER Working Papers 16893, National Bureau of Economic Research, Inc.
  8. Michael Woodford & Vasco Curdia, 2010. "The Central Bank's Balance Sheet as an Instrument of Monetary Policy," 2010 Meeting Papers 136, Society for Economic Dynamics.
  9. Olivier Coibion, 2012. "Are the Effects of Monetary Policy Shocks Big or Small?," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(2), pages 1-32, April.
  10. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1, December.
  11. Benoît Mojon, 1998. "Monetary Policy Under a Fixed Exchange Rate Regime, the Case of France 1987-1996," Working Papers 1998-14, CEPII research center.
  12. repec:cup:cbooks:9780521708388 is not listed on IDEAS
  13. Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
  14. Benati, Luca & Goodhart, Charles, 2010. "Monetary Policy Regimes and Economic Performance: The Historical Record, 1979-2008," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 21, pages 1159-1236 Elsevier.
  15. Mojon, Benoît, 2008. "When did unsystematic monetary policy have an effect on inflation?," European Economic Review, Elsevier, vol. 52(3), pages 487-497, April.
  16. Leeper, Eric M., 1997. "Narrative and VAR approaches to monetary policy: Common identification problems," Journal of Monetary Economics, Elsevier, vol. 40(3), pages 641-657, December.
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