09/19/2019

Draining bad loans in China: bad banks are not enough

By Irena Peresa and Edouard Vidon

Amid slowing growth and corporate deleveraging, State intervention in certain Chinese banks is again on the table. 20 years ago, asset management companies (AMCs) were set up to bolster the largest lenders, but their purpose has radically changed since. To address current bad loan issues, the priority should be to develop the secondary NPL market.

Figure 1: Four AMCs were originally set up to bolster the largest state-owned banks
Figure 1: Four AMCs were originally set up to bolster the largest state-owned banks Source: Authors
Updated on 09/19/2019 15:07.
09/13/2019

The French trade balance over the past 40 years: what are the drivers?

By Yannick Kalantzis and Camille Thubin

The trade balance as a share of GDP reflects decisions regarding consumption, and therefore saving, and investment. Over the past 40 years, its dynamics in France have been dominated by the cycle of construction: the balance deteriorates in boom phases. The rise in household saving, which contributed to the surplus of the 1990s, was offset after the crisis by a higher share of government consumption in GDP.

Chart 1: Contributions to the Trade Balance,% of GDP in deviation from 1981
Chart 1: Contributions to the Trade Balance,% of GDP in deviation from 1981 Source: INSEE.
Updated on 09/13/2019 12:01.
09/11/2019

Climate risk: where do French banks and insurers stand?

By Laurent Clerc

What are French banks and insurers doing to prepare for climate change? Where do they stand in terms of implementing France’s Energy Transition Law? Our analyses show significant though mixed progress with regard to transparency and governance of risks, and a growing but still incomplete recognition of climate risk as a financial risk.

Chart 1: Geographical breakdown of the exposures of French banks
Chart 1: Geographical breakdown of the exposures of French banks Source: ACPR. Note: as a percentage of total outstanding amounts for the 7 main French banks at 30 June 2018
Updated on 09/11/2019 17:15.
09/05/2019

The impact of innovation on the wages of low-skilled workers

By Philippe Aghion (Collège de France and LSE), Antonin Bergeaud (Banque de France), Richard Blundell (UCL and IFS) and Rachel Griffith (University of Manchester and IFS)

Technical progress forces workers to adapt to new production methods. It thus favours the most highly skilled workers as they earn relatively higher wages than the least skilled. However some less qualified employees can also benefit from these technical changes provided, they have the skills sought after by innovative firms.

Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms
Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms Note: Data for the United Kingdom taken from the Annual Survey of Hours and Earnings, matched to the Business Expenditure on Research and Development survey (2004-2016). Hourly wages in GBP on a logarithmic scale. Source: Aghion et al. (2019).
Updated on 09/09/2019 17:55.
09/03/2019

How do foreign banks react to French prudential policies ?

By Stéphane Dees and Julio Ramos-Tallada

Overall, French prudential policies entail a reduction in foreign banks’ lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities’ goals: foreign bank affiliates’ exposure to France rose by 1.1% (up EUR 1.5 billion) on average over 2011-17 owing to the implementation of Basel capital requirements.

Chart 1: Foreign banks’ exposures to France (as a % of total bank debt of French residents)
Chart 1: Foreign banks’ exposures to France (as a % of total bank debt of French residents) Source: BIS Consolidated Banking Statistics (CBS) – Immediate Borrower (IB) and authors’ calculations.
Updated on 09/03/2019 11:03.
08/20/2019

Forecasting inflation in France using consensus economics data

By Magali Marx

The recent inflation dynamics in advanced countries are difficult to understand and forecast. This post looks at the contribution of Consensus Economics Inc. projections in forecasting total one-year inflation in France over the period 2009-2019.

Chart 1: Capturing the inflation trend using Consensus Economics Inc. projections
Chart 1: Capturing the inflation trend using Consensus Economics Inc. projections Sources: INSEE, Consensus Economics Inc., author’s calculations. Chart 1: Total inflation (year-on-year HICP), average of one-year inflation projections for year (N+1) of Consensus Economics Inc., and inflation trend for France
Updated on 08/20/2019 11:08.
08/02/2019

Does the ECB balance of risks matter for monetary policy decisions?

By Klodiana Istrefi and Giulia Sestieri

The ECB balance of risks for price stability and growth provides useful information on the Governing Council’s assessment of risks to the euro area outlook. Abstracting from unconventional monetary policy measures, an analysis since mid-2003 shows that: i) upside risks to inflation are associated with rate hikes, ii) downward risks to growth with rate cuts, and iii) in the case of conflicting signals, inflation takes priority.

Figure 1. ECB balance of risks and key ECB policy rates
Figure 1. ECB balance of risks and key ECB policy rates Sources: ECB and authors’ calculations. Since Sept. 2014 (vertical dashed line), no comment on inflation risks, except for downside risks from Sept. 2015 to March 2016. The DFR cut of 8 Oct. 2008, reversed the day after, is not shown.
Updated on 08/02/2019 13:31.
07/30/2019

Strengthening the Global Financial Safety Net in the face of heightened risks

By Ludivine Berret, Marie-Hélène Ferrer and Céline Rochon

In a world marked by reduced fiscal and monetary leeway and heightened risks, a strengthened Global Financial Safety Net is desirable, in addition to better macroeconomic policy coordination. This issue, discussed under the French G7 Presidency, calls for a renewed multilateralism (see the blog on “The G7, an engine for multilateralism”).

Chart 1: Evolution of the size and composition of the Global Financial Safety Net
Chart 1: Evolution of the size and composition of the Global Financial Safety Net Source: IMF, Adequacy of the Global Financial Safety Net, 2016.
Updated on 07/30/2019 11:20.
07/26/2019

Where is euro area inflation in relation to the “Phillips cone”?

By Clémence Berson, Hadrien Camatte, Antoine Lalliard and Julien Le Roux

The “Phillips cone” is a range of possible values for inflation obtained using different specifications of the Phillips curve. The Eurosystem’s June 2019 projection for euro area inflation is slightly below the median forecast in the Phillips cone for the entire projection horizon, and even slightly below the cone at the start of the horizon. This suggests that the Eurosystem’s projection is fairly prudent.

Chart 1: The euro area projection is prudent relative to the Phillips cone
Chart 1: The euro area projection is prudent relative to the Phillips cone Source: Eurostat, Eurosystem, authors’ calculations Note: after the first quarter of 2019, the black line shows the Eurosystem’s June 2019 projection.
Updated on 07/26/2019 11:29.
07/19/2019

Citéco, first European museum for economic education

By Marc-Olivier Strauss-Kahn, Chairman of the Citéco Scientific Council

“Cité de l’économie”, Citéco, is the new Parisian interactive museum for economic education: the first of its kind in Europe! Citéco is housed in Hôtel Gaillard, a private mansion built in the 19th century and then bought by the Banque de France (hereafter BDF). The BDF financed the restoration and adaptation to the general public of this historic monument. Citéco now offers up to twelve hours of visits with about 50 entertaining videos and 25 educational games (see Picture 1).

Picture 1: Educational games in the historical ballroom
Picture 1: Educational games in the historical ballroom Source: The author
Updated on 07/19/2019 11:39.
07/17/2019

The regulation of global systemically important banks has met its goals

By Aurélien Violon, Dominique Durant and Oana Toader

Global systemically important banks (GSIBs) – those whose failure could adversely affect the economy – are subject to stricter regulations than other banks, leading them to curb the expansion of their balance sheets to a greater extent and resulting in a fall in their share of global bank assets. We show that, despite this, GSIBs have not reduced their lending to the economy. The G20’s goals have thus been met: GSIBs have been made more resilient to shocks without negatively affecting the financing of the economy.

Chart 1: Decline in GSIBs’ share of the total assets of large banks
Chart 1: Decline in GSIBs’ share of the total assets of large banks Source: S&P Market Intelligence – Sample of 97 large banks (34 of which were designated as GSIBs at least once over the period under review).
Updated on 07/18/2019 11:56.
07/15/2019

75 years of Bretton Woods: why nothing (ever) worked as expected

By Eric Monnet and Marie-Hélène Ferrer

On the occasion of the celebration of the 75th anniversary of the Bretton Woods Conference, this post reflects on the history of the international monetary system of the same name (1944 - 1971). The Bretton Woods system did not work as expected. Rather than cultivating the myth of a golden age, it is preferable to recognise the adaptability of monetary and financial multilateralism over time.

Figure 1: The hotel where the Bretton Woods Conference was held (New Hampshire, USA)
Figure 1: The hotel where the Bretton Woods Conference was held (New Hampshire, USA) Source : https://commons.wikimedia.org/wiki/File:The_Mount_Washington_Hotel,_Bretton_Woods,_NH.jpg
Updated on 07/15/2019 16:43.

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