Pierre-Cyrille Hautcoeur

Threat of a capital levy, expected devaluation and interest rates in France during the interwar period

This paper tries to improve the understanding of the French interwar monetary situation by using thoroughly one indicator: long-term interest rates. As such, it could be attacked from a methodological point of view as relying excessively on that indicator and on a small number of hypothesis (although we have empirical arguments for each of these). We do consider that if each one of our hypothesis (and then our measures) may be discussed, the global picture we draw is the only one which puts all the available data in a consistent order. This picture is different from the prevailing one in some aspects concerning the Poincare stabilization, and reinforces one of the interpretations of the 1930s.

A challenge to triumphant optimists? A blue chips index for the Paris Stock-Exchange (1854-2007)

We have reconstructed a new blue chips (large caps) stock index for France from 1854 to 1998, based on a modern methodology. Our index differs profoundly from earlier indices, and is more consistent with French financial and economic history. We suggest this result casts some doubt on many historical stock indices, such as those used in Dimson, Marsh and Stauntons Triumph of the Optimists. Investment in French stocks provided a positive real return during the nineteenth century, but a negative one - because of inflation and wars - in the twentieth. Despite this secular negative real performance, stocks proved the best financial asset in the very long run, although with an equity premium lower than in the US.

The Paris Financial Market in the Nineteenth Century: Complementarities and Competition in Microstructures

This article sets out to explain why the Paris Bourse was highly successful in the nineteenth century in spite of the supposedly inefficient monopoly of the official market, the Parquet. The literature argues that the official monopoly was sidelined by a free, innovative market known as the Coulisse, but it fails to explain how the Coulisse emerged despite the monopoly and how the two markets persisted alongside each other during the entire century. We provide a detailed history of how these two markets emerged and interacted. The Parquet increasingly developed as a high-end market, providing security, transparency, and effective settlement-delivery to unsophisticated investors trading on the spot market. The Coulisse provided liquidity, immediacy, and opacity to professional investors trading mostly forward. In line with recent theoretical developments, we argue that the juxtaposition of heterogeneous organizations had important virtues for market participants, since it allowed the exchanges to specialize in different investors and services and made the exchanges complementary to each other. We demonstrate our claim by looking at both the formal rules and the actual functioning of the Parquet, drawing on its archives which we have recently classified.

Was the Great War a Watershed ? The economics of World War One in France

This paper presents a broad, quantitatively documented, overview of the French economy during World War One, trying to answer the question of whether the war was a turning point in French economic history. It first describes the various shocks the war imposed to the economy, from invasion to labour and capital mobilisation. It then studies macroeconomic policies, especially the finance of both the budget and the balance of payments deficits. It then turn to government interventions in the economy, suggesting they were less important than frequently asserted, and showing thanks to two quantitative tests that the economy probably adapted to the war more spontaneously than usually believed. It ends with some remarks on the effects of the war on future growth, arguing that the main problem for France resulting from the war was the change in the international political and monetary environment.

Why didn't France follow the British stabilisation after World War I?

We show that the size of the public debt, the budget deficit and the monetary overhang made it impossible for France to stabilize its price level and return to the pre-war parity immediately after World War I, even on the anti-keynesian assumption that a stabilization would not have had any negative effects on real income. The reason for the immediate postwar inflation then was not mismanaged policy but a wise choice in the French context. Nevertheless, a stabilization at a devalued franc which would have been substantially higher than the rate achieved by Poincar‚‚ in 1926 was historically possible in early 1924, and it would likely have benefited not only France but the entire international monetary system.

What Financiers Usually Do, and What We Can Learn from History

Abstract This paper aims at presenting an historical perspective on some of the major questions raised by Hyman Minsky and his recent followers, in particular about the instability of banking practices and the diffusion of the “originate and distribute” model under the domination of securities markets. We will argue that, when dealing with these issues, one must take great care at distinguishing what is actually new and what is recurrent. Financial innovation is nothing new. Risk taking through financial innovation is not new either. Banks have been innovating constantly over the last centuries, and many of their practices that we consider as “traditional” have not always been so, and result from a long process involving trials and errors, each error usually resulting in excessive risk-taking and waves of failures. We point out that markets have survived these crises when they have been able to organize and build the institutional structure allowing the various interests involved to become consistent with each other.