The Other Way: A Narrative History of the Bank of France

41 Pages Posted: 17 Sep 2018

See all articles by Vincent Bignon

Vincent Bignon

Banque de France

Marc Flandreau

Centre for Economic Policy Research (CEPR)

Date Written: August 2018

Abstract

This paper offers a comprehensive (short) history of central banking in France, starting in the 18th century and finishing with the creation of the Euro in 2001. We first discuss how the French experience with central banking in the 18th century shaped the drafting of the charter and the governance of the Bank of France in 1800. We then single out how the Bank implements its monetary policy in the 19th century and assess the bank achievement in terms of monetary and financial stability. Finally we discuss how the sovereign debt overhang triggered by World War I and the reconstruction subverted the model of central banking previously implemented, and how the reluctance of the Bank to be implicated in the management of the sovereign yield ultimately leads to the loss of its independence vis-a-vis the state. Against this background the use of financial repression under the guidance of the state allowed a smoother management of the debt overhang during the post WW II period, but created its own issues that were addressed effectively only with the creation of the Euro.

JEL Classification: E58, N23, N24

Suggested Citation

Bignon, Vincent and Flandreau, Marc, The Other Way: A Narrative History of the Bank of France (August 2018). CEPR Discussion Paper No. DP13138. Available at SSRN: https://ssrn.com/abstract=3244511

Vincent Bignon (Contact Author)

Banque de France ( email )

DGEI 49-1430
31 rue Croix des Petits Champs
Paris, 75001
France
+33142924330 (Phone)

Marc Flandreau

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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