Chapter

Managing the Franc in Belgium and France: The Economic Consequences of Exchange‐Rate Policies, 1925–1936

Isabelle Cassiers

in Banking, Currency, and Finance in Europe Between the Wars

Published in print September 1995 | ISBN: 9780198288039
Published online November 2003 | e-ISBN: 9780191596230 | DOI: http://dx.doi.org/10.1093/0198288034.003.0008
 Managing the Franc in Belgium and France: The Economic Consequences of Exchange‐Rate Policies, 1925–1936

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The central feature of this comparative analysis of the French and Belgian experience is the distinction between the international and domestic sectors of the two economies. The author shows that in Belgium, as in France, the stabilization of the franc in 1926 brought a period of export‐led growth to an end, and further economic expansion rested on a boom in the domestic sector, with high profitability and a surge in private investment. In the case of Belgium, the domestic sector remained relatively prosperous during the initial stages of the Great Depression, but the strict deflationary policies imposed in the attempt to sustain the gold standard eventually reduced domestic demand and the economy plunged into depression. Both countries were forced to devalue, but political and economic differences made the process more successful in Belgium than in France.

Keywords: Belgium; boom; currency stabilization; deflationary policy; devaluation; domestic sector; export‐led growth; France; gold standard; Great Depression

Chapter.  9210 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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