ABSTRACT
France is accustomed to adjusting to external constraints. That explains why the exchange rate plays such an important role in its economic policy. This role has been transformed since 1978, and still more so since 1983. The setting up of the European Monetary System (EMS), the progressive adaptation of the EMS to a system of fixed exchange rates until September 1992, and the prospect of Economic and Monetary Union (EMU) from the early 1990s onwards, have all profoundly modified the international environment for France. These developments have in turn transformed the country’s exchange rate policy. This policy originally sought to achieve the fastest-possible growth rate and the nominal exchange rate was adjusted to make the growth rate compatible with external constraints. Under the Bretton Woods system, devaluations were discrete and infrequent; they then took place continuously in response to the vicissitudes of floating between 1973 and 1978, interspersed only with two short periods of pegging to the Deutsche mark under the ‘Snake’ agreement. The new, so-called ‘franc fort’ policy gradually emerged in the early 1980s. The principle of competitive disinflation replaced that of competitive devaluation.
