Abstract

In the course of the past ten years, monetary policy has become increasingly important. While at the beginning of this period it was merely a simple factor to sustain growth and full employment, it later became a fundamental element in combatting inflation. In France, as in other countries, this development undoubtedly stems from a better understanding of the subsequent effect of an excessive increase in liquidity of firms and households. Though the Banque de France may set itself a monetary objective, that does not make it a proponent of monetarist theory by a long way. It is true of the central bank, however, that while not necessarily a supporter of monetarist theory, in practice it has always been more or less monetarist-oriented. With a view to slowing down the increase in liquidity and stabilizing the liquidity ratio of the economy, the central bank has used very diverse means, some of which have proved disappointing in practice to the extent to which their effectiveness was weakened by external restrictions or occasionally underestimated internal structural rigidities. In the period unter review, however, the central bank came to realize that credit restriction is an indispensable instrument for the current situation. By announcement of a monetary objective for the years 1977 and 1978, appreciation on the part of public authorities of the fact that limitation of credit expansion is meaningful only within the framework of concerted action embracing all sources of money creation has been heightened. Monetary policy is not a comprehensive and effective panacea for treating an inflation and an economic crisis of which the origin does not lie in the monetary domain. The growing importance of the role of monetary policy must not lead to its being assigned an exclusive character, but only to its being allotted its proper place among the changing components of overall economic policy.