The Price of Stability. The balance sheet policy of the Banque de France and the Gold Standard (1880-1914)

Guillaume Bazot, M. D. Bordo and Eric Monnet

Working papers from Banque de France

Abstract: Under the classical gold standard (1880-1914), the Bank of France maintained a stable discount rate while the Bank of England changed its rate very frequently. Why did the policies of these central banks, the two pillars of the gold standard, differ so much? How did the Bank of France manage to keep a stable rate and continuously violate the rules of the game ? This paper tackles these questions and shows that the domestic asset portfolio of the Bank of France played a crucial role in smoothing international shocks and in maintaining the stability of the discount rate. This policy provides a striking example of a central bank that uses its balance sheet to block the interest rate channel and protect the domestic economy from international constraints (Mundell s trilemma).

Keywords: gold standard; Bank of France; discount rate; central banking; money market. (search for similar items in EconPapers)
JEL-codes: B41 D41 E30 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-his, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: The Price of Stability: The balance sheet policy of the Banque de France and the Gold Standard (1880-1914) (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:510

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