Abstract

Belgian Monetary Policy over the Past Ten Years

In the course of the past ten years, Belgian monetary policy has undoubtedly contributed towards stabilization of the business cycle and the value of money. Its measures aimed at promoting a trend of indebtedness which matched the savings of firms and private persons and counteracted destabilizing capital flows to foreign countries. On account of the ever more complex situation, which was attributable primarily to the acceleration of price increases, partly due to higher production costs, and to the profound changes in the international monetary system, the monetary authorities modified their monetary policy measures. Interest rate policy, the main instrument used in the past, was based more and more on foreign trade equilibrium. To enable the central bank to exert greater influence on the borrowing of firms and private households, its array of instruments was expanded. To permit control of the credit offered, the possibilities for the banks to take recourse to the central bank (lender of last resort) were restricted, or the banks were required to freeze part of their available funds (minimum reserve requirement). Over and above this, at certain times the conditions for credit expansion were laid down. Lastly, foreign exchange control by way of a double foreign exchange market (controlled and free market) proved an effective means of combatting certain capital movements.