محدودیت نقدینگی محلی : سیاست های منطقه ای بانک مرکزی چگونه مکان یابی می شوند؟ تجربه فرانسه در طول Belle Époque در سال1880–1913

This paper examines whether improved geographical access to the central bank contributed to local credit development in France during the Belle Époque (1880–1913). I use a new data set of credit by administrative area (département) in order to test the effect of the Bank of France network of branches on an indicator of local “credit development”. The results suggest that, despite potential market frictions created by the Bank of France, the positive effects of the network of its branches outweighed the negative ones.

Drawing on Joseph Schumpeter's insights, economists have recently attempted to assess the role of finance in economic development. The literature commonly argues that financial development generates growth and that barriers to the good development of financial systems can depress capital markets (Levine, 2005). In this respect, the effect of central bank intervention on the credit market turns out to be critical. While central bank supervision helps to prevent banking crises, central bank lending should also assist the market at moments of liquidity constraint. In both cases the central bank aims to prevent market imperfections from depressing credit conditions. On the other hand, supervision comes with new banking restrictions, while lending can distort the market and engender banking rents. Whether central bank interventions have positive or negative effects on financial development is thus an open question. The French experience of the Belle Époque (1880–1914) is particularly useful for shedding light on the issue. As in Japan ( Mitchener and Ohnuki, 2009), Austria ( Jobst, 2010) and Belgium ( Ugolini, forthcoming) among other countries, the French central bank, usually at the request of local banks and municipalities, opened a large network of branches (succursales and bureaux auxiliaires) to collect information, supervise banks and provide liquidity locally through the rediscounting of commercial and credit papers, 1 and advances on securities (avances sur titres). Although the Bank of France (BoF henceforth) network of branches proved particularly useful in collecting local information, local interventions were not necessarily good for local credit markets. Central bank branch detractors argue that central bank use of privileges can crowd out other banking institutions, reduce banking competition and restrict credit, especially to non-strategic sectors ( Lescure, 2003). 2 This fear seems justified since the BoF could – although only in a few circumstances – discount bills directly in the market ( Lescure, 2003), support inefficient bankers (see Collot (1999) for an example) and discriminate among banks as to access to its discount window. Previous enquiries (see Nishimura, 1995, Plessis, 1999, Gonjo, 2003 and Baubeau, 2004 among others) cited evidence of BoF branch abilities to support local banking markets. In particular, the literature suggests that BoF branches encouraged local and regional bank lending operations and thereby increased firms' access to credit. However, none of these studies account quantitatively for market frictions created by the BoF. Likewise, the lack of comprehensive data about the local volume of credits hampers systematic analysis. For instance, Nishimura (1995) observed a small sample of branches to assess the impact of BoF local policy on credit supply. Given the diverse nature of the French economy, an exhaustive examination of the BoF network is needed. Exhaustive data for each département should help to avoid these problems and to assess the impact of the BoF network of branches on local credit development. This paper proposes two new points in this regard. First, it presents a new data set for an indicator of credit development for each département. Second, it assesses the role of the BoF network of branches upon this indicator. The empirical evaluation uses panel data analysis on a spatial basis. It first considers the correlation between the number of BoF branches of each département and credit development. Control variables are also added to account for other factors, such as the size of local economies and local businesses. However, as some endogenous effect may remain, identification issues may prevent the explanatory variable from being totally exogenous. I therefore use instrumental variable techniques to eliminate potential biases. The instruments appear robust and respect all basic conditions of effectiveness of instrumental variable analysis. The results finally converge to demonstrate that the positive effects of the BoF network of branches on the credit market outweigh the negative ones. This result is not unconnected to the debate about the role of central bank supervision and discount policy. Unlike Goodfriend and King's (1988) conclusions, the banking policy proves to be useful when relationship lending is a key feature of banking activities. As a matter of fact, the prominence of relationship lending can impede interbank private arrangements (Freixas and Hotlhausen, 2005) and result in liquidity constraints, especially for small banks that use private information more intensively (Kashyap and Stein, 2000 and Bindseil et al., 2009). This leaves more room for discount window operations, the effect of which hardly distort the market so long as central banks are well informed about the banks to which they lend (Acharya et al., 2012). The rest of the paper proceeds as follows: Section 2 looks at the historical background of the French banking system; Section 3 presents the data on credit development; Section 4 provides econometric specifications and results; Section 5 proposes estimations and robustness checks, and Section 6 presents the conclusions.

The transformation of the French banking system of the late 1880s led the BoF to refocus its activities dramatically. As deposit banks succeeded in taking hold of the market of first quality credit, local banks and the BoF tended to extend their cooperation. While local banks took advantage of their local knowledge to extend their credit, the BoF provided the liquidities that local banks needed to cope with routine liquidity risk. Insofar as local banks used a large set of local information for their transactions, the BoF network of branches proved to be essential for such relationships to thrive. Many studies have tried to assess the economic impact of this cooperation but none has accounted for the potential market frictions and inefficiencies that BoF intervention could bring about. In this paper I have mobilised new statistical arguments to assess the role of the BoF network of branches vis-à-vis credit development. Using a new data set of French département credit development, I show that the network of BoF branches had a positive impact on local credit development during the Belle Époque. This result suggests that, in an environment of relationship banking, central banks banking policy can improve access to credit. However, these results are not necessarily relevant for countries with a different banking structure. For instance, the English banking system proved to be much more concentrated than the French one and consequently, a large central bank network of branches would have not necessarily improved bank access to liquidity. The positive effects of the central bank network of branches might not have outweighed the negative. In fact, the Bank of England network of branches was small and poorly appreciated by private banks (see Clapham (1944) and Ziegler (1990)). In other words, it might have been the very nature of the French banking system that allowed such a network of branches to increase credit development. It is finally worth noting that this paper does not discuss the global efficiency of the French financial system. Two points should be added in this regard. First, local positive effects do not necessarily imply nationally positive ones. For instance, the BoF policy may have hampered the banking market from concentrating, the effect of which might have been positive regardless of local credit development.36 Second, the BoF banking policy may have encouraged banks to take more risks. Although the BoF strove to supervise banks, guaranteed access to liquidity may have triggered moral hazard issues. Credit development might thus have coincided with more risk and instability. Therefore, it is still uncertain whether the BoF network of branches contributed to French economic development, and that opens perspectives for future research on the topic.