Monetary policy without interest rates: Evidence from France (1948 to 1973) using a narrative approach
Eric Monnet 05 July 2014
The Global Crisis has raised the interest of banks in using quantitative controls, such as credit controls. This column discusses a relatively recent historical episode of credit controls in France. During this episode the role of interest rates was almost eliminated. Quantitative controls effectively decreased output and prices in the short-run. The difficulty for the Central Bank stemmed from the fact that it had to change its instruments constantly. This historical episode demonstrates that macroprudential tools can have substantial effects on monetary policy.
Recent central bank interventions following the Global Crisis have raised new interest in quantitative measures as instruments of monetary or macroprudential policy (Borio 2011, Galati and Moessner 2013). In fact, quantitative controls – especially credit controls – have been used as primary tools of monetary policy for decades in western Europe and east Asia, usually during periods when these countries were experiencing their highest ever rates of growth. Many countries, including Brazil, India, and China, still use them today.
Europe's nations and regions Monetary policy
France, monetary policy, credit controls