Monetary Policy without Interest Rates

Many econometric studies use both a narrative approach and an interest rate series to investigate the e ects of US monetary policy. The two alternative measures provide very similar conclusions. This similarity in the results is not likely to be found when central banks use numerous instruments, including unconventional quantitative targets. This paper studies the French experience with temporary quantitative controls from 1948 to 1973. First, I explain why a quantitative monetary policy uses by nature many instruments (including controls both on the credit supply and on the money supply) that negate the role of interest rates and why this policy cannot be measured in the usual way. Second, I use a narrative approach, relying on various archival records, to build an accurate measure of this quantitative policy. The proposed measure takes into account the duration of restrictive episodes and is treated endogenously in a SVAR. Contractionary monetary policy shocks decreased production and in ation signi cantly. The impulse response functions show a pattern very similar to standard VAR studies despite the sample, the country, the type of monetary policy and the identi cation method being all quite di erent. On the contrary, using interest rates as measures of monetary policy does not provide any consistent result. These results o er a revisionist account of postwar monetary policy under Bretton Woods and before the Great In ation. They also suggest that quantities of money and credit can play a greater role than their prices in the adjustment process of the economy.