Abstract

Credit Controls and Regulation of the Quantity of Money in France

France is undoubtedly the country in which the mechanisms of credit control and regulation of the quantity of money have been changed most frequently, on the one hand on account of the very recent progress made in industrial and financial structures, and on the other owing to the attention paid to regulations desingned to protect the external value of the franc. In a historical introduction the author describes what traditional financing methods of the firm (use of bill of exchange) and what habits of the population (large proportion of bank notes in the total quantity of money) may impede the effectiveness of modern control instruments. Then, first of all, a description is given of the existing restrictions applying to non-residents who wish to invest, lend or borrow funds in France; in this respect efforts are made to preserve a certain: degree of freedom of capital movements. Subsequently the domestic controls are depicted, especially the minimum reserves for demand or time deposits, the minimum of medium-term securities or debentures which the banks must nold. The author deals thoroughly with the instrument of reserves for credit increments and, in conclusion, the supplementary reserves for those increments, which are practically tantamount to a ceiling. All these measures are augmented by various more recent means of intervention, which re-introduce the conception of selective, qualitative controls which was abandoned in principle in 1967. The author is of the opinion that these complicated regulations should one day be adapted to those of other countries in the EC. He is very sceptical of their efficacy, in particular because too little attention is paid to structural differences.