From Direct to Indirect Monetary Policy Instruments: The French Experience Reconsidered

Author/Editor:

Marc G Quintyn

Publication Date:

March 1, 1991

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

If not carefully planned, the transition to indirect monetary policy instruments may result in a loss of control. The 1967-71 attempt in France failed because of a misconceived instrument-mix and sequencing. Credit controls, reintroduced in 1972, were only formally abolished in 1987. This paper attributes the successful 1987 reform to changes in the policy framework in the 1980s. The interest rate was already the key instrument because direct controls became less effective and because of the priority given to the exchange rate objective. Consequently, the 1987 transition was from pegging to guiding the interest rates. Empirical evidence underpins this interpretation.

Series:

Working Paper No. 1991/033

Subject:

Bank credit Banking Credit Credit controls Demand for money Monetary policy Money Reserve requirements

English

Publication Date:

March 1, 1991

ISBN/ISSN:

9781451979169/1018-5941

Stock No:

WPIEA0331991

Pages:

43

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