Mr. Ezekiel, economist in the Research and Statistics Department, is a graduate of the University of Bombay. He taught economics at St. Xavier’s College, Bombay, and at the Department of Economics, University of Bombay, and was Financial Editor of The Economic Times. He has published several articles in economic journals.
Thus, “the money market … is defined in France as the market for liquidity in the form of Central Bank balances;” see European Economic Community (EEC), “The Instruments of Monetary Policy in France,” The Instruments of Monetary Policy in the Countries of the European Economic Community (Brussels, 1962), p. 116.
The only nonfinancial institution which has access to the call money market is the nationalized railway system, the SNCF. On the other hand, the Treasury, which in France (in addition to its fiscal operations) operates in many respects like a bank, does not operate directly in the call money market.
The commercial bills covered by this term include medium-term equipment, construction, and export paper.
The sale of a bill en pension is a sale with an agreement to repurchase after a specified period—usually quite short, e.g., a day or two. The effect of this double transaction is that the original buyer provides credit to the original seller of the bill for that period against the security of that bill.
A detailed examination of the forms, instruments, and institutions through which the banks obtain assistance is to be found in P. Grivet, La Mobilisation des Crédits Bancaires en France (Paris, 1962).
For French banks, borrowing or lending in short-term money markets abroad does not appear to be a relevant alternative method of obtaining or using liquid resources. The French banks “do not, strictly speaking, maintain foreign exchange portfolios. Nor are they authorized to convert into francs the currency they borrow from their own foreign correspondents”; see EEC, op. cit., p. 116.
Outflows and inflows are understood here to be net of Treasury issue of bills to banks and specialized financial institutions. However, insofar as the specialized institutions rediscount with the Bank of France bills purchased by them, there is an additional expansionary effect on the liquidity of the banks. In other words, the expansionary or contractionary effect of the Treasury’s operations in this connection should really be measured by changes in the Treasury’s net indebtedness to the central bank even if some parts of these changes take place indirectly through the banks and other specialized institutions.
Much of the information on which this section is based has been drawn from the Conseil National du Crédit, Annual Reports, 1948–63.
Paper obtained by the Bank of France through its open market operations is shown in its balance sheet under the heading “Negotiable Paper Purchased in France.” The total value of such paper has for several years fluctuated between NF 2,000 million and NF 3,000 million. However, see pages 395–96, below.
Since early in 1964, bills which the banks are obliged to take to satisfy the planchers are described as “Treasury certificates.” Only bills to which the banks subscribe in excess of the minimum limits now bear the name “Treasury bills.” The latter are now issued periodically by tender. However, the discussion in the text continues to use the term “Treasury bills” in the wider meaning.
Data on call money rates over this period have been obtained from the Conseil National du Credit, Annual Reports, 1948–63.
The existence of serial correlation was determined by applying the Durbin-Watson Test. Adjustment was made for the presence of serial correlation by using the method presented by L. R. Klein, A Textbook of Econometrics (New York, 1956), p. 159.