The Bank of France and the Open-Market Instrument: An Impossible Wedding?

GATE Working Paper Series WP 1423

37 Pages Posted: 30 Sep 2014

See all articles by Nicolas Barbaroux

Nicolas Barbaroux

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE)

Date Written: September 29, 2014

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.

Keywords: Open-market, Monetary policy, Central banking

JEL Classification: N14, B22

Suggested Citation

Barbaroux, Nicolas, The Bank of France and the Open-Market Instrument: An Impossible Wedding? (September 29, 2014). GATE Working Paper Series WP 1423, Available at SSRN: https://ssrn.com/abstract=2502790 or http://dx.doi.org/10.2139/ssrn.2502790

Nicolas Barbaroux (Contact Author)

University of Lyon 2 - Groupe d'Analyse et de Théorie Economique (GATE) ( email )

93, chemin des Mouilles
Ecully, 69130
France

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