More often than is commonly recognized, central banks have moulded themselves to fit into the economic and political contexts in which they evolve. Eric Monnet, an economic historian at the Paris School of Economics, has devoted several years to understanding the functioning and evolution of the Banque de France since the 1930s. In this rigorous and fascinating volume, he traces back the Banque’s historical continuities and the institutional innovations introduced since the early post-war years, when reconstruction was at the heart of France’s economic policies. This particular historical context led the Banque de France to actively intervene in credit markets through a set of what we would now consider “unconventional” tools. This proactivity allowed the institution to coordinate its efforts with the government in order to allocate credit to priority sectors. Monnet’s focus on credit policy allows him to connect his narrative with different bodies of literature, including the literatures on central bank autonomy, on their role on fighting inflation, on the relationship between economic growth and finance, and the literature on the process of European monetary integration.

This study is structured by a general introduction, a general conclusion, and seven chapters divided into two parts. The first part includes a brief introduction and a conclusion, along with three roughly chronological chapters (i.e., pre-1945, 1945–1958, and 1960–1980), each of which portrays the different controversies and challenges that arose in each sub-period. The second part is thematic and concentrates on three relevant topics combining theoretical and empirical perspectives (e.g., credit allocation, the financing of the Treasury, and monetary integration). The general conclusion offers certain parallels between France’s post-war experience and today’s main debates on central banking. Some of these parallels focus mainly on challenges faced by today’s central banks in emerging market economies.

The introduction situates Controlling Credit within the different bodies of literature to which it contributes. To begin with, Monnet clarifies the approach adopted in the first part of the book, which he deems as “institutionalist.” This perspective is well-justified, given the need to contextualize the emergence and persistence of credit policy in post-war France, but also to encompass the legal, political, and social bases of the State’s credit proactivism. The introduction also enumerates the key contributions of Controlling Credit.

A first contribution is the historical reconsideration of the factors that led to the “Thirty glorious years,” whose literature has barely considered the role of central banks and monetary policy. Monnet contradicts the classical account that depicts central banks as having solely served to finance the Treasury’s needs, thereby creating inflation. Secondly, Controlling Credit offers a detailed account of the mechanisms through which the French State actively intervened in credit markets—complementing, regulating, and influencing market forces. This so-called “credit policy” was mainly defined as a set of quantitative and qualitative controls implemented by the Banque de France during those years. Monnet convincingly demonstrates in Chapter 4 how little interest rates mattered during that period. Finally, and perhaps most importantly, Controlling Credit is not restricted to a pure economic perspective. Monnet includes concepts from political science and law to analyze the processes under which credit policy was shaped. He highlights the relevance of the legal framework in which the Banque de France was embedded, but also how political debates and ideas interacted with the evolution of credit, inflation, and economic performance. This multidisciplinary perspective allows the reader to expand its conception of monetary policy.

In Chapters 1 and 2 Monnet describes the increased role of the State in the provision of credit, first through the establishment of public and semi-public institutions since the end of WWI, but also through the State’s professed attitude that led credit to become a national priority in the 1930s. The legal structure established in the aftermath of WWII was to a large extent a continuation of the set of reforms introduced since the early 1940s. The nationalization of credit introduced in the post-WWII period, all the way to 1958, is described in Chapter 2 in which Monnet portrays the new institutional setting of that period. Here the National Credit Council emerged as a key institution in charge of regulating banks, of defining short-term monetary policy, and of intervening in the allocation and regulation of bank credit. It coordinated with other public institutions according to the investment priorities defined by the government. The volume of credit allocated to each sector also considered the needs of the government, the potential effects of credit growth on inflation, and the need to restore balance of payments equilibrium. Chapter 3 depicts the deinstitutionalization of this system, defined as a shift from credit management to bank supervision since the 1960s. This process took place as the government liberalized the economy, promoted international trade, and allowed the private sector to expand.

In the second part of the book, Monnet addresses specific questions. In Chapter 4, he identifies episodes of restrictive monetary policy—defined as periods of increased quantitative credit and liquidity controls—and analyzes their effects on industrial production and price levels. In Chapter 5, Monnet describes how the Banque de France was able to finance the Treasury, mainly through the provision of direct loans that did not appear in the Banque’s balance sheet. This lack of transparency gave some margin of manoeuvre to the Treasury, even though certain limitations persisted due to the threat of inflation. Chapter 6 analyzes the apparent paradox of high growth and financial repression during the Golden Age of European growth. It analyzes the effects of credit allocation on sectoral capital accumulation and capital reallocation. Chapter 7 provides a comparison between European central banks through the lens of the “varieties of capitalism” literature. Yet, Monnet adds other elements to the analysis, including the responsibility of central banks in terms of banking supervision, credit allocation, and financing of government debt. He shows that their level of involvement in each of these tasks varied and depended on the level of organization of the state of each country, on market ideologies, and on the structure of the financial system. This chapter also links the end of credit policy to the rise of European monetary integration.

There is a lot to like about Controlling Credit. It offers an appealing and largely needed analysis of the history of central banking during a period of strong transformations. Monnet has dug deep into the archives and demonstrates a profound knowledge of different strains of literature that rarely have a dialogue. His multidisciplinary approach has become a rare feature among economic historians. This polyvalence also includes the methodological procedures in which econometrics stands as complement to the rigorous use of archival sources.

The reader may be left wanting more of a few topics. For instance, there is a secondary and sometimes superficial account of domestic and foreign actors. There is barely any mention of the industrialists’ reactions to changes in credit policy, let alone those of French unions. The international sphere also arises somewhat late in the volume. Episodes such as the Marshall Plan, the early stages of European Integration, or the interactions with the IMF or the BIS appear only on the margins. Given the importance devoted by the Banque de France to the balance of payments, one may wonder how interactions with those organizations could have influenced the activity of the Banque. Finally, international comparisons focus mainly on the United Kingdom, even though the volume later on acknowledges that there are strong similarities with many other European countries. That is, one gets the sense that the circulation of ideas across the continent might have been more significant than this volume conveys.

Nevertheless, these are relatively minor concerns. Controlling Credit is an excellent study on how a State was capable of promoting and allocating credit in a challenging environment, and how a central bank could mutate to address many of the economy’s most pressing needs. Scholars and central bankers would strongly benefit from the insights provided in this volume, in particular into how established paradigms could gradually make way for new ones that may better respond to severe political, financial, or economic shocks.