CAPITAL MOBILITY, DOMESTIC POLITICS, and FRENCH MONETARY DIPLOMACY

James I. Walsh

Review of Policy Research, 2002, vol. 19, issue 1, 80-106

Abstract: This article evaluates the role of increased capital mobility, sectoral interests, and domestic institutions in bringing about policy change in French capital markets. Capital mobility played an indirect role by making it more costly for French governments to pursue inflationary economic policies. But it was domestic politics, not capital mobility, that led governments to achieve lower inflation by stabilizing the exchange rate. The key domestic political factor was institutional change to regulatory practices, while financial markets reduced bank lending to industry and internationalized French finance, breaking the strong ties and comon monetary diplomacy interests of bankers, industralists, and policymakers, and thereby weaken the political priority of promoting domestic growth and industrial competitiveness.

Date: 2002
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https://doi.org/10.1111/j.1541-1338.2002.tb00230.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:revpol:v:19:y:2002:i:1:p:80-106

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