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In his classic work on currency, Nurkse argues that 'the post-war history of the French Franc up to the end of 1926 affords an instructive example of completely free and uncontrolled exchange rate variations'.1 According to Friedman,2 Nurkse only uses this example to defend his thesis on the potentially destabilising effect of currency speculation. More recently, Eichengreen argues in relation to the French episode that 'A notable feature of post-war international money arrangements was the freedom of the float. As a rule, central banks did not intervene in the foreign-exchange market. The first half of the 1920s thus provides a relatively clean example of a floating exchange rate regime.'3 For Eichengreen, 'the French authorities only intervened in the exchange market for two months, in the spring of 1924 and during the second half of 1926'.4
These two episodes became well known following Jeanneney's5 and Debeir's6 writings on the former and Governor Moreau's7 on the latter. Following Eichengreen's empirical investigations of the impact of speculating on stability,8 these authors developed the hypothesis of a one-to-one relationship between the monetary base and exchange rate during the second half of 1924 and the first half of 1926. Frenkel, who uses the French example to check the PPP relationship, makes exactly the same assumption in that he assumes, de facto, an absence of endogeneity in variations of the monetary base.9
Our study of the archives of the Bank of France and the French Ministry of Finance, as well as a thorough examination of the exchange rates (FRF/USD) and (FRF/GBP) during the 1920s, reveals that the French authorities intervened on three other occasions: once between November and December 1924, again from June to October 1925 and also between May and June 1926. We will here analyse the motives, means and consequences of the actions as systematically as possible. Even if these interventions seem to be non-sterilised, the fact that the French authorities maintained the stability of nominal interest rates to facilitate the sustainability of the public debt leads us to bypass their effect on portfolios.10 However, their direct influence on exchange rates can be noted and our attention will therefore be focused...