ABSTRACT
In the 1980s, France evolved from a system of tight administrative control over financial intermediation to a widely deregulated financial system driven mainly by market mechanisms. This evolution was motivated by revisions in French monetary policy and by dramatic changes in the international financial environment. Changes included the abolition of credit regulation and exchange controls, the introduction of new financial products (for instance, commercial paper, UCITS1 shares, etc.) and of new financial markets (MATIF, for instance) and the revival of old markets. All these changes have influenced the behaviour of financial agents as well as non-financial agents. As a result, the specifications in macroeconomic models have been modified. This leads to a sharp distinction between the models estimated before financial innovation and those estimated after financial innovation. MEFISTO, a model of the French financial system put forward by the Banque de France, belongs to the ‘second generation’ of models, whether we consider its first version (SEMEF, 1992) or its second version (SEMEF, 1993).
