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The Bank of France and the Open-Market instrument: an impossible wedding?

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  • Nicolas Barbaroux

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

In the aftermath of the sovereign debt criss, open-market interventions prevailed within the central bank's policy answers known under the label unconventional monetary policy measures. During interwar period, France was an isolated case, among the leading countries, by everlastingly rejecting open-market operations in its monetary policy toolset. The present study analyzes the French monetary policy history by explaining why Bank of France had been so old-fashioned in monetary policymaking for too long time. Moreover, the article provides an explanation of the latter point by raising five major arguments of explanation : (1) the irrelevancy of the French interwar monetary reforms which enabled the Bank of France to conduct open-market operations per se; (2) the French conservatism throughout the insiders' view from the Bank of France leaders (not only governors and deputy governors, but also the General Council's members at the head of the French central bank); (3) the legacy of a metallist vision, embodied by Charles Rist, within the French economists of that time (4) the negative public opinion regarding open-market operations which were seen as being an inflationist public debt financing instrument and lastly (5) the unfair competition that occurred between the discounting operations and the open-market operations in the Bank of France's balance sheet.

Suggested Citation

  • Nicolas Barbaroux, 2014. "The Bank of France and the Open-Market instrument: an impossible wedding?," Working Papers halshs-01069286, HAL.
    • Handle: RePEc:hal:wpaper:halshs-01069286
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01069286
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    References listed on IDEAS

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    1. Mauro Boianovsky & Hans-Michael Trautwein, 2001. "An Early Manuscript by Knut Wicksell on the Bank Rate of Interest," History of Political Economy, Duke University Press, vol. 33(3), pages 485-508, Fall.
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    3. Henry C. Simons, 1936. "Rules versus Authorities in Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 44(1), pages 1-1.
    4. Nicolas Barbaroux, 2013. "Monetary Policy in Theory and Practice: Facing Internal vs External Stability Dilemma," Post-Print halshs-00667705, HAL.
    5. Charles Goodhart, 1988. "The Evolution of Central Banks," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262570734, April.
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    Keywords

    Open-market; Monetary policy; Central banking;
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