Learning to manage external constraints : Belgian monetary policy during the Bretton Woods era (1944-1971)

This paper analyses the Belgian monetary and exchange rate policies at the time of Bretton Woods. It sheds light on the groping adjustment process by which internal economic policies are hit by or adapt to the external constraints. In 1944, an ambitious monetary reform laid down the economic policy objectives that remained in force for two decades, namely price stability and strong currency. However, we point out different incompatibilities between these objectives and the economic context of the 1950s and the 1960s that could have negative consequences on Belgian economic growth. More precisely, the long lasting European currencies inconvertibility (1944-1958) contradicted the orthodox approach of the monetary policy favoured by the Central Bank. When total convertibility was finally achieved, the huge increase of capital movements led to a progressive loss of the monetary policy autonomy, despite the setting up of a two-tier exchange market, which can be viewed as an institutional innovation responding to new constraints