Looking for a change point in French monetary policy in the early eighties

Abstract

We investigate where, in the early eighties, did a change occur in French monetary policy. The novelty in our treatment of this subject is the use of the impulse saturation break test. The results clearly identify the adoption of the Franc Fort policy as the key change in the period. The resulting econometric model is congruent and reveals no signs of persistence in inflation.

Notes

¹ I am indebted to Laurent Bilke for having made this data set available to me. The data was built at the Banque de France by Baudry and Tarrieu (2003).

² A total of 373 observations for the CPI yield, 372 observations for inflation, which is the number of impulse indicators created.

³ Signs and magnitudes of consecutive dummies allow for this mapping. See details on the theory of step dummies as index variables in Hendry and Santos (2005), and a first application in Oliveira and Santos (2007).