Nicolas BARBAROUX Associate Professor in Economics

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1 Nicolas BARBAROUX Associate Professor in Economics Personal data Born June, 1st, 1979, St Etienne, France Professional adress Jean Monnet University, GATE Lyon Saint-Étienne UMR 5824,FRANCE 6 rue basse des Rives, Saint-Étienne Cedex 02. Office phone number (+33) (0) Office fax number (+33) (0) Nicolas.Barbaroux@univ-st-etienne.fr Current position 09/ : Associate Professor in Economics at the University of Saint-Étienne (France). Research interests Monetary Policy Rule, History of Macroeconomics, Monetary and Banking History. Education : Ph.D in Economics, untitled "The Concept of Monetary Policy Rule : Lessons from Interwar Practices and Theories in France and Sweden" (written and defended in English), under Joint Doctoral Program in Jean Monnet University (France) and University of Oldenburg (Germany), with highest level of distinction for a Ph.D.. Committee members : Prof. S. Diatkine (Paris 12 Univ.), Prof. Dr. H. Hagemann (Honenheim Univ.), Prof. Dr. H-M. Trautwein (Oldenburg Univ.), Prof. M. Bellet (St Etienne Univ.), A. Zouache (St Etienne Univ.), : Master of Economics, Jean Monnet Universiy, in Saint-Étienne and University of Lyon 2 (France), cum laude. Refereeing Journal of History of Economic Thought (JHET) History of Economic Ideas Journal of Interdisciplinary Economics OEconomia, Coll. History, Methodology, Philosophy Teachings Macroéconomics II (Post IS-LM), Lecture in Bachelor of Economics degree. Monetary Macroeconomics, Lecture in Bachelor of Economics degree. Banking Economics, Lecture in Bachelor of Economics degree. Macroeconomics and Economic Policy, Business School Lecture in Master s degree. Introduction to Economics, Lecture in Bachelor of Economics degree. 1

2 RESEARCH ACTIVITIES AND PUBLICATION 1 Book "Monetary Policy in Theory and Practice : facing internal vs external stability dilemma", 2013, Routledge 1, Series : Routledge International Studies in Money and Banking, 248 pages, ISBN : Articles The Wicksellian Flavour in Macroeconomics, Perfil de Coyuntura Economica, 2008, No. 11, Juillet / Septembre, Un panorama des différents marchés financiers (with G. Jacoud), 2011, Cahiers Français "Comprendre les Marchés Financiers", Ed : La Documentation Française, N 361(Mars-Avril), Book review on Les esprits animaux : comment les forces psychologiques mènent la finance et l économie., (Shiller/Akerlof), 2013, Journal of Interdisciplinary Economics, Vol. 24-1, Book review on States of Credit : Size, Power, and the Development of European Polities, by David Stasavage, 2012, OEconomia, Coll. History, Methodology, Philosophy, Vol. 2-3, Work in progress 2013 Keynes Tract on Money and the current financial instability issue 2012 Woodford et la politique monétaire d après crise : une réconciliation wickselienne? 4 Working Paper Series 2013 "Open-market and Bank of France : getting married or getting divorced?" 2012 "Monetary policy and value judgments : Did we forget Myrdal s legacy?" (witten with Prof. Bellet) "The Financial repression policy : what can we learn from the French Interwar History?" ; 2011 "The French Monetary Policy during Inter-war : the unfaithfulness in the monetary policy rule process ; 2010 :"The Wicksellian Connection II in the History of Macroeconomics" ; 2009 : "To Rule in or to Rule out : A Theoretical and Historical Survey on the notion of Monetary Rule" ; 2008 :"Credit and Prices in the New Neoclassical Synthesis" (coécrit avec Alexander Tobon- Colombie) ; 2007 : "Woodford and Wicksell : a Cashless economy or a Moneyless economy framework?" ; 2006 : "The French Monetary Policy in the Inter-War Period : the Dismissal of Open Market Procedure" ; 2005 : "The Role of History in Wicksell s Methodology" : "Wicksell and the Methodenstreit : an unknown standpoint", 1. See the abstract on Routledge website : http :// 2

3 International Conferences-National Conferences 2014 : Macroeconomics in Perspectives Workshop, Louvain-la-Neuve (Belgium), January, : 62 me Congress of the French Economic Sciences Association, University of Aix en Provence, June : Workshop Interface "Economic Theory and History of Economic Thought, Lyon-France, 31 May-1st June : 17 me ESHET conference (Economic Society of History of Economic Thought), London, May, : 44 th Annual UK history of economic thought conference, University of Keele (UK), 3-5 September ; 2012 : 29 th International Symposium " Money, Banking and Finance" (GdRE), Nantes, France, June, 28-29, 2012 : Annual Conference for the study of the History of Economic Thought, Nice, France, June, : 16 me ESHET conference (Economic Society of History of Economic Thought), St Petersbourg, Russia, May, : Doctoral Conference from ADRES, January, Paris, 2010 : PROCOPE Workshop on "Business cycles, equilibrium and economic policy", University of Nice Sophia Antipolis, GREDEG, 23rd-24th April, 2010 : 14 th ESHET conference (Economic Society of History of Economic Thought), Amsterdam, Netherlands, March : 13 rd ESHET conference (Economic Society of History of Economic Thought), Thessalonique, Greece, April, 2008 : 12 th ESHET conference (Economic Society of History of Economic Thought), Prague, Czeck Republic, May, 2007 : Annual Conference of the History of Economic Society (HES), Fairfax-USA, 8-12 June, Working Paper [7] : 11 th ESHET conference (European Society for the History of Economic Thought), Strasbourg, France, 5-7 July, 2006 : 23 rd International Symposium International on "Money, Banking and Finance" (GDR du CNRS), Lille, France, 22 au 23 June, 2006 : 10 th ESHET Conference (Economic Society of History of Economic Thought), Porto, Portugal, April, 2005 : 9 th ESHET Conference (Economic Society of History of Economic Thought), Stirling, Ireland, 9-12 June, 2004 : 8 th European Summer School in History of Economic Thought, Nice (France), September, 2004, SCIENTIFIC VISITS-INVITED SEMINARS 2014 : Invited seminar on "Monetary market and Monetary policy", University of Paris 12 (PHARE), January 2013 : Invited seminar on "History of Macroeconomics", University of Paris 1 (PHARE), November 2013 : Invited seminar in Louvain-la-Neuve University (Belgium), october 2007 : PhD studies (Joint Doctoral Program) at the University Carl von Ossietzky, in Oldenburg 3

4 (Germany) under the supervision of Prof. Dr. H-M Trautwein : Research visit in the Archive of the Bank of France (Paris) : PhD studies (Joint Doctoral Program) at the University Carl von Ossietzky, in Oldenburg (Germany) under the supervision of Prof. Dr. H-M Trautwein : Research visit in the Archive of the Bank of France (Paris) : PhD studies (Joint Doctoral Program) at the University Carl von Ossietzky, in Oldenburg (Germany) under the supervision of Prof. Dr. H-M Trautwein. 4

5 PhD SUMMARY The PhD belongs to the tradition of the history of macroeconomics, with a specific focus set on monetary macroeconomics throughout the study of the monetary policy rule concept. The originality of the present work relies on the chosen method. The approach is interesting in threefold : it combines an analysis of contemporaneous macro-models (mainly through the New Neoclassical Synthesis models developed by Woodford) while keeping the link with the history of economic thought (mainly the critical monetary works of Wicksell, Keynes and Cassel) and the central bank s monetary practices as well. The last point needs to be underlined since the PhD brings new elements and data collected from the Bank of France s archive in Paris. Based on the practical examples given by the French and Swedish monetary policies during interwar, the thesis aims at revisiting the theoretical and methodological debate on "Rule vs Discretion" inherited from the works of H. Simons, in 1936, untitled "Rules versus Authorities". Following the New Orthodoxy tendency opened by Eichengreen, Blancheton or Flandreau (to name a few), the PhD demonstrates that the "rule vs discretion" debate is an heresy in the extent that monetary policy rule (such as the one embodied during the gold standard eras or even the modern monetary policy rules such as the reaction function à la Taylor) had never been separated from discretionary practices. Instead of supporting the opposition between monetary rules and discretionary elements, the PhD pleads in favor of the complementarity between monetary policy rules, whatever the case of a more or less rigid rules, and discretionary stances. Faithful with the spirit and message given by Keynes "Tract on Monetary Reforms" in 1923, the discretionary content in monetary policymaking can be justified by the necessity to find a compromise between the internal stability (i.e stability of prices) and the external stability (i.e exchange rate stability entrusted in the golden rules). The central bank s history testifies of the everlasting conflicts that central bankers had to face between those two types of stability. The same conclusion was given by Cassel in his critical analysis of the gold standard functioning (1936). In that context, the interwar period was a cornerstone in monetary history because from that time, monetary policy changed its focus from external stability to the internal one. The Swedish monetary policy was enlightening. Following the Wicksellian heritage, the Swedish central bank abandoned, in 1931, the gold standard system (and its external stability objective) to the benefit of a more flexible (modern) monetary policy rule, which targeted price stability. On the contrary, the French case is enlightening as well. France was featured by an everlasting devotion to the gold standard rules while deliberately violating those rules. The PhD demonstrates, with the help of new data, how the Bank of France transformed its orthodox monetary policy (the one imposed by the gold standard philosophy) into an activist one disconnecting from the gold standard rules. The rough criticisms that emerged, in that time, from Keynes, Cassel or later one by the League of Nations report (Nurkse, 1944) plead in that direction. All of them gave relevant contributions showing how discretionary behavior during the gold standard was the only rule that prevailed. As an outcome, the PhD concludes by opening new debates for monetary policymaking. The first one relies on a return to Wicksellian roots for macroeconomics. Woodford s Neo-Wicksellian approach, materialized by the publication of his own "Interest & Prices", proves Leijonhufvud (1981) right. Leijonhufvud saw the macro family tree as a two traditions family : the first one referring to a Wicksellian tradition in which the interest rate mechanism prevails as an equilibrium rate between investment and saving ; whereas the second tradition, labelled as a Quantitativist one, saw the investment-saving identity as an allocative device disconnecting from the stability 5

6 of prices. From both the practical and theoretical analysis, the PhD provides a new insight and a new definition on what is a monetary policy rule. This definition is faithful with Bernanke and Mishkin (1997) vision on a monetary policy with "constrained discretion". 6

7 RESARCH PROGRAM My research program focuses on monetary policymaking which I analyzed throughout the rule vs discretion debate. The main result provided is that central bankers had always needed discretionary power for the implementation of monetary policy due to the internal vs external stability dilemma. Such thesis is mainly demonstrated by the 2013 book published by Routledge. However, most of the working papers written and the two research filed participated to this result. 1. History of Macroeconomics analysis : The work belongs to monetary policy theme. It mainly deals with the last monetary policy framework, such as the one proposed by New Neoclassical Synthesis à la Woodford in connection with the works of the Swedish economist Knut Wicksell. Woodford s monetary policy framework : this cashless framework echoes to the Wicksellian "pure cash economy". More particularly, it is the status that money holds which is centerpiece. All of that brings about a quite different monetary policy management. The paper written in 2007, untitled "Woodford and Wicksell : a cashless economy or a moneyless economy framework?" tries to draw the parallel between Woodford and Wicksell on money. Moreover, the article makes a comparison between Woodford s money vision and the approach defended by Neo-Monetarist s economics such as Mc Callum, Nelson or Meltzer. The article concludes on some similarities between Woodford and those new monetarists. This article had been published, in a revised version, in a Colombian macroeconomics review, "Perfil de Coyuntura Economica"(N 11-Juillet/Septembre), under the title "The Wicksellian Flavour in Macroeconomics". Woodford in the macro-family tree : the idea was to update the macro-family tree by integrating the approach proposed by Woodford. The article written in 2009, "The Wicksellian Connection II : Wicksell and Woodford in the Macro Family Tree", starts from Leijonhufvud s macro-family tree and analyzed Woodford s cashless framework. Moreover and with the collaboration of Dr. Tobon Alexander in Colombia, another article, untitled "Credit and Prices in Woodford s New Neoclassical Synthesis", analyzed Woodford s monetary policy approach. The main criticism we adress to Woodford s framework is the association between an intertemporal optimal agent hypothesis and the resulting Taylor s monetary policy rule. We show that it is impossible to have a dynamic disequilibrium process emerging from an interest rate gap such as the one developed by Woodford it Neo-Wicksellian model. 2. History of economic thought and monetary practices analysis : The history of economic thought and the analysis of central banks practices can be complementary to the theoretical analysis. In this approach, I focus on the explicit elements of discretionary power in the implementation of the French monetary policy : "Open-market and Bank of France : getting married or getting divorced?" : Based on the result given by the dataset we constructed, the present article supports the thesis that Bank of France got a conflict of interest between its profitability -as a private bankand the duty imposed by its central bank s activity. As profitability mattered more than its non-profit maximizing role, the Bank of France was not yet a true central bank in interwar times (Goodhart 1988 : 9).The paper analyzes five major arguments of explanation : (1) the irrelevancy of the French interwar monetary reforms which enabled the Bank of France to conduct open-market operations per se ; (2) the French conservatism throughout the insiders view from the Bank of France leaders (not only governors and 7

8 deputy governors, but also the General Council s members at the head of the French central bank) ; (3) the legacy of a metallist vision, embodied by Charles Rist, within the French economists of that time (4) the negative public opinion regarding open-market operations which were seen as being an inflationist public debt financing instrument and lastly (5) the unfair competition that occurred between the discounting operations and the open-market operations in the Bank of France s balance sheet. "The French Monetary Policy in the Interwar Period : a monetary rule?" : this article, written in 2006, is based on the collected data emerging from the Bank of France archive department. The working paper demonstrates how the French monetary policy during interwar was heterodox. Three major arguments are given : (1) the fixed discount rate policy ; (2) the Sterilization policy (between ) ; and the (3) dismissal of openmarket procedure. "To Rule in or to Rule out : A Theoretical and Historical Survey on the notion of Monetary Rule" : this work provides a theoretical survey on the monetary policy rule concept. It is common to think and to speak about monetary policy by using the monetary policy rule concept. Following the door opened by Keynes in 1925, the notion of monetary policy rule moved from that Keynesian roots to the benefits of the Chicago School tradition, embodied in Herbert Simon works and later on in Friedman s ones. The latter approach presented monetary policy rule as a bipolar strategy for central bankers : rule vs discretion conflict. In order to illustrate my thesis that monetary policy is never, and had never been, disconnected from discretionary stance, we used the French interwar monetary policy to give a prime illustration. 8

The Rationale for Independent Monetary Policy

The Rationale for Independent Monetary Policy Bennett T. McCallum Tepper School of Business, Carnegie Mellon University Shadow Open Market Committee March 26, 2010 1. Introduction Recently there has been