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Post n°316

By Lucas Devigne, Laure Lalouette and Raymond de Pastor

The number of banknotes in circulation and the motives for holding them have evolved over the past 20 years. The increase in banknote issuance coincides with a significant rise in both domestic hoarding of cash reserves and foreign demand. The escalation in motives for hoarding, but not for transactional purposes, has slowed the velocity of banknote circulation.

Post n°315

By Stéphane Dees, Simon Dikau, Hugh Miller, Romain Svartzman

Several metals will play a critical role in the transition to a zero-carbon economy. Imbalances between supply and a growing demand for these metals could arise. In order to assess these imbalances, Miller et al (2023) estimate the demand for metals induced by the NGFS climate scenarios and outline the potential implications in terms of macro-financial vulnerabilities.

Post n°314

Central banks are shifting toward greater clarity in communicating their policy decisions, as reflected in simpler and engaging versions of monetary policy statements. We show that while the policy statements of the ECB, the Fed and the Bank of England are complex and cover several topics, their simplified versions focus on the main challenges for the general public (currently inflation).

Post n°313

By Clémence Berson and Elisa Busson

Job-to-job moves usually enable employees to improve their pay or working conditions. It is therefore an important factor in wage dynamics. Resignations, which often indicate a job change, can be used to forecast wage and inflation trends.

Post n°312

By Florian Le Gallo, Pauline Négrin and Pierre-François Weber

Policies aimed at fostering strategic autonomy have emerged in the European Union (EU) as a response to a geopolitical and economic environment that has been disrupted by major crises. Given their consequences for price stability, financial sovereignty and financing of the economy, these policies raise questions for the Eurosystem.

Post n°311

By Pierre Bui Quang and David Nefzi

Socially Responsible Investment (SRI) funds take account of social, environmental and governance considerations in their investment policy. Are they really greener than non-certified funds? Indeed, portfolio analysis suggests that on average they are. However, certification does not necessarily guarantee environmental excellence.

Post n°310

By Claire Brousse and Youssef  Mouheb

In 2022, the crypto-asset market underwent a sharp fall in valuation. After previously attracting a number of retail investors who were searching for high yields in 2021, the market revealed its instability. The expansion and high volatility of the crypto-asset market has resulted in greater risks and losses for crypto players and investors alike.

Post n°309

By Marie-Hélène Ferrer, Luc Jacolin, Caroline Perrin

Although it is a factor in financial inclusion and development, the growth of mobile banking in Sub-Saharan Africa (SSA) has nonetheless gone hand in hand with a growing gender gap in financial inclusion. This unexpected consequence of financial digitalisation calls for a rethink of development policies.

Post n°308

By Oriane Wegner

While at first glance climate change might appear to affect all members of the population equally, studies have found gender disparities in individual and professional behaviours that generate greenhouse gas emissions, and in the consequences of climate change.

Post n°307

This post investigates how monetary policy announcements in the US and the euro area have affected inflation expectations since 2021. We show that a 100bp surprise increase in 2-year rates translated into a 30-50bp drop in medium-term inflation expectations. Central banks’ effective communication was the main factor influencing inflation expectations around these announcements.

Post n°306

By Valentin Burban and Pavel Diev

In the context of the global monetary tightening cycle, we show that most emerging countries have reacted in line with their price stability objectives. But three major emerging market economies - China, Russia and Türkiye - are currently in an easing phase for idiosyncratic reasons.

Post n°305

By Laurent Clerc, Timothée Dufour, Pierre Harguindeguy and Stefano Ungaro

The customer base of digital financial players is rapidly expanding. The sector is characterised by a wide variety of business models. Among the players analysed over the 2018-20 period, the "100% digital" ones have become profitable because of their specialisation approach and their ability to develop strategic partnerships, while the traditional players have instead sought to diversify their customer base.

Post n°304

The French bancassurance model stems from the growth of the life insurance market. Based on the results of a model of 800 French banks on a non-consolidated basis over the 1993-2021 period, being part of a financial conglomerate enhances the resilience of groups due to the fact that they are exposed to certain external shocks in an asymmetric manner.

Post n°303

By Mathias Lé and Frédéric Vinas

We analyse how French firms financed their investment over the 1992-2016 period. We show that the funding mix varied significantly according to the size of the firms, whether or not they were listed on the stock exchange and the nature of the investments undertaken. These results suggest that the Capital Market Union could foster business investment by developing equity financing.

Post n°302

By Céline Grislain-Letrémy and Corentin Trevien (CREST-ENSAE)

We evaluate the long-term effect of housing subsidies on the price, quantity and quality of private rental accommodation in France. The overall upward effect on rents is accompanied by an increase in the total number of dwellings. These effects depend on the market segment. They have not proved long-lasting for small dwellings, which have increased in quantity.

Post n°301

Industry-level wage bargaining for 2022 was impacted by the high inflation context. Over the year, close to 150 industries revised the agreements signed at the end of 2021 or beginning of 2022. Overall, at the end of the year, negotiated wage increases amounted to an average of 5% year-on-year (compared with 3% at the beginning of the year). However, this higher increase in negotiated wages does not, at this stage, point to the start of a wage-price spiral.

Post n°300

By Iris Chagnaud, Jean-Baptiste Gossé, Florian le Gallo and Rémy Lecat

France’s European financial integration, measured by its capital flows to its main partners, accelerated strongly with the introduction of the euro and European measures designed to unify financial services. It fell back significantly with the global financial crisis and then the euro area debt crisis. Its recovery in 2018-19 has since been tested by the Covid-19 and energy crises.

Post n°299

The recent rise in inflation could affect households' and businesses' perception of inflation. This post describes new indicators of perceived inflation in France constructed from alternative data: newspaper articles and messages from the social network Twitter. The advantage of such data is that they are available at high frequency and in real time.

Post n°298

By Raj Rajesh, Paul Vertier, Thibault Lemaire, Arthur Stalla-Bourdillon, and Aude Le Metayer

The increase in global wheat prices in the last two years, especially after the start of the Ukraine war, reflects a strong market integration and a high dependence on energy and fertiliser prices. As several developing countries depend on a small number of wheat exporters, curbing food insecurity will require coordinated action and crop diversification.

Post n°297

By Violaine Faubert and Florian Le Gallo

Ten years after joining the European Union, Croatia will adopt the euro on 1 January 2023, thus becoming the 20th member of the euro area after Lithuania. The adoption of the euro, which is achieved by complying with the convergence criteria, will reduce the exchange rate risk. Lower transaction and financing costs will strengthen trade and financial integration, thereby promoting real convergence.

Post n°296

By Pierre-Emmanuel Caplet - 2nd prize in the 2022 Eco Notepad competition - Masters student at Paris-Saclay Ecole Normale Supérieure (ENS)

Despite the pandemic’s abatement, teleworking seems to be holding steady. This new working arrangement could have several consequences for the labour market: reduced business costs; greater worker flexibility; more rapid digitalisation; and new geographical and sectoral dynamics.

Post n°295

By Lili Vessereau
1st prize in the 2022 Eco Notepad competition
Second year student for the Master's degree in Corporate & Public Management at Sciences-Po Paris

By shortening the number of days spent on-site at their workplace, teleworking can, under certain conditions, broaden job seekers’ geographical search perimeter. By reducing the rigidities linked to geographical mobility, teleworking could thus contribute to lowering frictional unemployment.

Post n°294

Overseas households are more exposed to natural disasters than in mainland France, with a 20% increase in the sinistrality expected by 2050. However, far fewer of them are insured. Insurance supply is developed and regulated. The low subscription is mainly due to uninsurable housing and the anticipation of assistance.

Post n°293

By Sebastian Stumpner

As part of its zero-Covid policy, China uses regional lockdowns to limit the spread of the virus. This blog estimates the effect of these regional lockdowns on Chinese trade. While most lockdowns have no noticeable effect, lockdowns of very high stringency are continuing to depress trade. The particularly stringent Shanghai lockdown in April 2022 reduced aggregate Chinese trade by 3-4%.

Post n°292

Since July, the ECB increased its key interest rates by 200 basis points in total (once by 50bps and twice by 75 bps). These are the largest single rate hikes of the ECB key interest rates. In this post, we examine to what extent these changes of policy rates passed through to the money market, the first step of monetary policy transmission. Transmission has been nearly complete in the unsecured market (e.g. on €STR) but subdued in the secured market (i.e. on repo transactions).

Post n°291

By Pauline Bacos and Naelle Verniest

Sustainability-linked bonds (SLBs) have an innovative format that links the bond’s coupon to the achievement of environmental, social or governance targets. Many SLBs now include targets for reducing greenhouse gas emissions. However, this mechanism must impose greater constraints on issuers in order to become a real decarbonisation tool.

Post n°290

By Thibault Lemaire and Paul Vertier

The rise in world commodity prices since mid-2020 has fuelled inflation in Africa. A new estimation strategy shows a pass-through of about 30% from commodity prices to consumer prices on the continent, which is higher than existing estimates. The impact is greater in low-income countries and in those countries where the food share in the consumption basket is the largest.

Post n°289

By Amélie Robinette

In 2022, the Paris marketplace maintained its rankings in global foreign exchange and over-the-counter interest rate derivatives markets. Activity volumes in Paris have risen sharply over the past three years, driven by strong internationalisation and aided by growing digitalisation.

Post n°288

By Barbara Castelleti Font and Véronique Genre

Since 2007, the recurring current account deficits in France have tended to worsen. However, the trade in services balance and the primary income balance, which traditionally show a surplus, have limited or even offset the goods trade deficit, which hit a record high in 2021 due in particular to the energy bill. In 2019 and 2021, France returned to a current account surplus. But the sustainability of this current account surplus is by no means assured.

Post n°287

By Lionel Fontagné, Fabio Grieco, Pierre-François Weber

An analysis of the results of the IMF’s recent simulations show that the innovative proposal for a carbon price floor leaves the questions of effort sharing between countries and carbon leakage unresolved. Consequently, further possibilities could be explored, particularly the interplay with a carbon border adjustment as well as the carbon price equivalence of regulatory measures.

Post n°286

By Boris Julien-Vauzelle, Camille Jehle, Jean-Baptiste Gossé

In 2021 and the first half of 2022, European start-ups raised record amounts and 68 of them gained the status of “unicorn”. Up to now, this dynamic has relied on the increasing involvement of US and Asian investors, particularly for late-stage funding rounds. This emphasises the need for the European Union (EU) to strengthen its own venture capital industry.

Post n°285

By Camille Cornand (Univ Lyon, CNRS, GATE), Paul Hubert

Monetary policy consists in part in managing inflation expectations of different agents. New US evidence on heterogeneous frequency of forecast revisions and disagreement among various categories of agents (households, firms, professional forecasters) suggests that targeting communication to specific groups could be a useful tool for central bankers.

Post n°284

By Bruno Terrien

Late payments are a structural weakness of companies in the French overseas territories. By accelerating the recovery of trade receivables, the health crisis has led to a significant reduction in the cash flow needs associated with payment times. However, companies facing the longest payment times did not benefit from this improvement.

Post n°283

By Nicoletta Berardi, Benjamin Bureau and Frédéric Delamarre

This post assesses the financial position of French SMEs at the end of March 2022, i.e. two years after the start of the Covid-19 crisis, and at the very beginning of the war in Ukraine. It finds that the vast majority of SMEs have weathered the health crisis well, particularly by keeping their net bank debt under control.

Post n°282

Debt-to-GDP ratios in advanced economies increased considerably during the Great Recession and the recent pandemic, and may prove to be a source of vulnerability. Commentators propose indexing the debt service to GDP growth to provide the government with an automatic stabilizer for its financing. FNew fndings suggest that GDP-linked bonds are more expensive for the government and can only prevent high tail risks in debt-to-GDP ratios in the short run.

Post n°281

The co-movement of sovereign bond yields has been unusually strong in the most recent period. A global factor usually explains much of the variation in 10-year yields. What has been particularly striking over the recent months is the importance of a global factor in explaining 2-year yields. This suggests a common shock is driving expectations of monetary policy in the major advanced economies.

Post n°280

By Roger Vicquéry

Recent geopolitical tensions have put the hegemonic role of the dollar, and its potential demise, back into the spotlight. Looking at a new long run measure of global currency competition over two centuries, no global currency leader has been able to sustain such a large lead over its competitors for such a prolonged period.

Post n°279

By Camille Macaire and Marie-Élisabeth de la Serve

The Covid crisis has strengthened China’s central role in global value chains. However, the rise in its position in these chains dates back to before the pandemic. It has become particularly closely integrated with ASEAN members, which import a growing share of intermediate goods from China.

Post n°278

By Tamaki Descombes, Antoine Kergadallan and Quoc-Trieu Le

Issuance of green bonds has been growing at a fast pace in the past 10 years, mainly under the impetus of the European Union and its Member States, which are the world's largest issuers. We take a closer look at this market and explore the challenges it poses, together with the prospects going forward: interactions with monetary policy, investor appetite, greenwashing risk, etc.

Post n°277

In a context where industrial jobs may be replaced by robots, this post shows that monetary policy is transmitted differently depending on industrial sectors’ degree of robotisation. Jobs in heavily robotised industries are half as sensitive to an interest rate change as those in low-robotisation industries.

Post n°276

By Hadrien Camatte, Théophile Legrand and Aster Recoules

Net asset purchases by the Eurosystem under the Pandemic Emergency Purchase Programme (PEPP) were discontinued at the end of March 2022, two years after its launch. This programme successfully prevented the fragmentation of the euro area sovereign debt market in response to the Covid-19 pandemic and will continue to preserve the transmission of monetary policy through flexible reinvestment.

Post n°275

By Paul Bouche, Julien Demuynck, Erwan Gautier, Frédérique Savignac

For the first time, the Banque de France is publishing the results of a survey on business leaders’ inflation expectations, collected since the end of 2021. One-year inflation expectations have increased since the beginning of the year and their median stands at 5% in the second quarter of 2022. Longer-term expectations (3-5 years) are also rising, but more slowly, with a median of 3%. This survey was conducted prior to the ECB's monetary policy normalisation announced on 9 June, which is expected to contribute to the gradual "re-anchoring" of inflation expectations.

Post n°274

By Stéphane Dees, Jean-François Ouvrard and Pierre-François Weber

Modelling is a key element in the Eurosystem's climate change action plan. Macroeconomic analysis and the preparation of monetary policy decisions are based on quantitative work in which models play a central role.

Post n°273

By Céline Grislain-Letrémy  and Bertrand Villeneuve (Université Paris-Dauphine)

The rising costs of natural disasters over the last decades are largely explained by urbanisation in exposed areas. Land-use and insurance policies can limit this urbanisation. Simple frequently-observed policies, with prohibited red zones and zones without insurance tariff differentiation, are relatively efficient. It is critical that red zones be redefined to reflect changes in climate risks or population developments.

Post n°272

In order to assess the quality of its research output, the Banque de France has constructed its own ranking of academic journals in economics and finance. The objective is to encourage the production of research on issues relevant to the Banque de France. This post explains the ten principles underlying the construction of this ranking.

Post n°271

Eric Monnet, Angelo Riva and Stefano Ungaro

During the Great Depression, bank runs in France were characterised by a flight from banks to savings institutions, which were perceived as safer. Here, we identify and quantify the effects of these bank runs and analyse the conditions that led them to deepen the economic crisis.

Post n°270

By Tristan Jourde

The Russian invasion of Ukraine led to a change in the structure of interconnections between financial markets. While the contagion effects have remained limited overall, the war has brought about new negative correlations between certain commodity indices (aluminium, oil, gold, silver, wheat) on the one hand, and equity markets, particularly in Europe, on the other.

Post n°269

So far in 2022, industry-level wage bargaining has generally resulted in wage increases of around 3% compared with rises of close to 1% in recent years. Inflation, which has been higher since the end of 2021, and the recent hike in the national minimum wage (NMW) are contributing to this stronger growth in negotiated wages.

Post n°268

By Sebastian Stumpner

This blog post examines to what extent the recent surge in international transport costs has fuelled US import price inflation. While we find a moderate effect at the aggregate level, there are significant differences across products that are largely driven by the degree of containerisation.

Post n°267

Rich households consume digital goods more intensively than poor households. As digitalisation makes some goods and services cheaper, higher-income households benefit more. Using US household data, this blog argues that the relative price effect of digitalisation is sizeable and amplifies the effects that digitalisation has on income inequality.

Post n°266

By Hyacinthe Buisson, Henri Fraisse and Matthias Laporte

The increasing use of artificial intelligence (AI) or machine learning (ML) techniques could allow banks to develop new credit risk models. These techniques could lead to substantial reductions in capital requirements. However, the opaque nature of these algorithms and the governance challenges they raise might make their adoption less attractive.

Post n°265

By Stéphane Dees, Jean-François Ouvrard and Pierre-François Weber

Macroeconomic and financial market disruptions linked to climate change and transition policies could affect the conduct of monetary policy. Climate risks could impair the monetary policy transmission channel, limit the monetary policy space for conventional tools and complicate the assessment of the monetary policy stance.

Post n°264

By Léa Le Quéau, Agathe Madeline and Paul Sabalot

The European Union is going to issue close to EUR 800 billion of debt to finance the NextGenerationEU recovery plan, making it one of the largest public debt issuers in the euro area. European debt has some key advantages that would make it ideal as a benchmark asset. However, it still needs to reach the critical mass required to ensure a sufficiently liquid secondary market.

Post n°263

By Mathieu Gex, Marie-Aline Vives

In response to Russia’s military invasion of Ukraine, the Council of the European Union has adopted a series of restrictive economic and financial measures, including the exclusion of seven Russian and three Belarusian banks from the SWIFT global financial messaging system. This blog post explains the key role SWIFT plays in the international financial ecosystem.

Post n°262

By Léa Grisey

Financial stakeholders report numerous data gaps that hinder their consideration of climate-related risks. While the lack of reliable, comparable, granular and forward-looking data is a challenge, some temporary solutions may help overcome it. Furthermore, recent efforts should allow to gradually bridge those persistent gaps.

Post n°261

A central bank’s inflation objective can be formulated using a point target, a target range or a combination of the two. In this blog, we show the disadvantages of a target range for anchoring inflation expectations and for macroeconomic stabilisation. The analysis thereby underpins the ECB’s adoption of a clear and symmetric 2% inflation point target.

Post n°260

By Bruno Cabrillac and Vincent Fleuriet

The Covid-19 crisis, combining supply and demand shocks with associated inflationary pressures, provides an opportunity to reassess the advantages of fixed exchange rate regimes over flexible or intermediate exchange rate regimes, in particular in Sub-Saharan Africa (SSA). Indeed, in this context, the anchoring of the currency via the fixed exchange rate gives more monetary policy space…

Post n°259

In several sectors, including academic economics, considerable efforts have been made over at least the past two decades to combat gender discrimination. One of the most frequently debated policies over recent years has been positive discrimination. Hiring or promoting an equally qualified woman over a man is argued to have a positive impact on all individuals in the profession as it will reduce prejudice and provide role models for younger women. Despite these efforts, women still appear to be vastly underrepresented amongst researchers in economic and earn far less credit than men for their academic work.

Post n°258

By Cristina Jude, Antoine Lalliard and Pierre Sicsic.

The employment rate in France has exceeded the level reached at end-2019. This is a French particularity. It nevertheless remains low compared to other countries, in particular for young workers and men over 60. Its growth over the past twenty years had been slower than in the other major countries until recently.

Post n°257

As part of the first climate pilot exercise, the Banque de France and the ACPR developed a series of models to quantify the financial risks associated with different climate transition scenarios. We present some of the results in this post. In some scenarios, the oil industry's probability of default is expected to increase by 400 bps, its credit spread by 30 bps and its stock market valuation is expected to decrease by 40-50% in 2050.

Post n°256

The increase in the money holdings by the non-financial sector in the euro area and the United States during the pandemic is explained by the strong increase in financial savings linked to public transfers and the sustained growth of loans, and in particular (in the euro area), government-guaranteed loans. Portfolio shifts strengthened the monetary dynamics in the United States, while they dampened them in the euro area.

Post n°255

By Annabelle de Gaye and Noëmie Lisack

In order to evaluate the financial risks linked to climate change, the Banque de France and ACPR have developed a suite of models that quantify adverse low-carbon transition scenarios for France. While the short-term macroeconomic effect is limited, the key impacts are located at the sector level and are strongly heterogeneous. A second blog post will examine the issue of financial stability.

Post n°254

By Antonin Bergeaud, Jean-Benoît Eymeoud, Thomas Garcia and Dorian Henricot

Corporate real estate market participants are starting to adjust to the take-off of teleworking in France. We show that teleworking already has an impact on the office real estate market. In French départements more exposed to teleworking, the Covid-19 crisis has led to higher vacancy rates, less construction, and lower prices. Forward-looking indicators suggest that market participants are expecting a lasting shift towards teleworking.

Post n°253

By Julien André, Yannick Kalantzis , Antoine Lalliard and Paul Vertier

The harmonised measure of inflation currently published in the euro area does not take into account costs related to owner-occupied housing. There are several ways of capturing these costs, including the “imputed rent” and “net acquisition” approaches. Incorporating these costs into the measure of inflation produces different results depending on the method used, and the size and sign of the impact vary over time.

Post n°252

Relative to demand factors, supply-side disruptions during the Covid-19 pandemic explain about 60% of longer delivery times and significantly dampened manufacturing output since 2020 in France. According to historical regularities, bottlenecks are expected to unwind in the course of 2022, while forecasts are surrounded by a high degree of uncertainty given the unusual origins of disruptions.

Post n°251

Both monetary and fiscal expansions have been needed during the past recent period in the euro area to sustain demand and inflation, mitigate the costs of the pandemic crisis and ensure a robust recovery. Conflicts of objectives between the two policies could, however, arise again in the future, in particular as a result of the ongoing accumulation of public debts and the large expansion of the Eurosystem’s balance sheet. Building on the work done during the recent ECB strategy review, this blog recalls the recent monetary and fiscal actions and presents some of the trade-offs for the post-pandemic period.

Post n°250

The Fed’s monetary policy influences firms’ debt composition. Conventional monetary policy (CMP) easing increases firms’ bank loans and reduces their bond issuance, while unconventional monetary policy (UMP) easing stimulates corporate bond issuance. UMP affects the US corporate debt structure through a portfolio-rebalancing channel, rather than a bank lending one.

Post n°249

By Gábor Fukker, Thibaud Piquard, Aurore Schilte and Matthias Sydow

The growth of non-bank financial intermediation calls for a more holistic risk assessment encompassing the entire financial system and the interactions between financial intermediaries. The incorporation of investment funds into a stress test for banks further increases the impact of a shock in terms of depletion of bank capital by 1%.

Post n°248

By Mathilde Salin, Romain Svartzman, Etienne Espagne, Julien Gauthey, Paul Hadji-Lazaro, Thomas Allen, Joshua Berger, Julien Calas, Antoine Godin and Antoine Vallier

Like climate change, biodiversity loss could be a source of financial risk. As a first analysis, we study the dependencies of the securities portfolio held by French financial institutions on ecosystem services, and the impacts on biodiversity of the activities financed.

Post n°247

By Olivier de Bandt, Juan Carluccio, David Lodge, Javier Perez

Since the previous ECB strategy review in 2003, interdependencies across countries have increased, making economic and financial conditions in the euro area more prone to foreign influence. However, the analyses behind the new ECB’s Strategy Review conclude globalisation does not impede the ECB from achieving price stability but calls for the adaptation of instruments and analytical toolkits.

Post n°246

After the 2008 financial crisis, then the 2020 health crisis, will the next global economic crisis be a cyber crisis? Cyber risk is a real threat to the economy and public authorities are mobilised to deal with it. This post presents an indicator used to monitor this risk on a daily basis, based on exchanges on the social network Twitter.

Post n°245

By Jean Barthélemy, Paul Gardin and Benoît Nguyen

The strong growth of stablecoins - the category of crypto-assets whose market value is supposed to remain stable by being pegged to a reference currency such as the dollar - is increasingly attracting the attention of regulators because of potential risks to financial stability. This post illustrates one of the mechanisms by which crypto-assets could impact financial stability: the growing use of stablecoins could prove destabilising to the short-term debt market in the United States.

Post n°244

By Katrin Assenmacher, Gabriel Glöckler, Sarah Holton, Klodiana Istrefi, Adrian Penalver

To ensure public understanding and trust, the ECB has to explain better what it does to all the people it serves. With these goals in mind, the Governing Council modernised its communication in July 2021, to have a stronger influence on interest rates and inflation expectations. The ECB will also listen more to citizens’ economic concerns.

Post n°242

By Jean-Baptiste Lézat-Eiffel

1st prize of 2021 Eco Notepad competition for students
While young people are the age group least affected by the virus, they are among the worst affected by the economic consequences of the crisis. Financial support schemes for young people need to be simplified to make them more accessible. They also need to be directed more towards measures that foster autonomy and professional integration.

Distance learning, entering the job market, future prospects, precariousness, isolation: the health crisis has changed the lives of young people. Eco Notepad, in partnership with the magazine "Pour l'éco", for its 2021 competition, invited students to share their analysis on the prospects of young people in the world of tomorrow.

Post n°243

By Jérémie Dubois

2nd prize of 2021 Eco Notepad competition for students
The economic shock triggered by the health crisis has significantly reduced the hiring of young people. Thanks to business support measures, the employment rate of the under-26s has been raised, but it remains low by international standards. We propose a second, complementary approach, aimed at limiting the labour supply of young people by encouraging them to further their education.

Post n°241

Yolaine Fischer and Giulia Sestieri

People’s views diverge as to which economic priorities the ECB should focus on. After recalling the economic rationale of the ECB mandate, as well as the legal framework, this posts gives some insights into the reasons why its new strategy takes account of other considerations, such as climate change, in the way in which the ECB fulfils its mandate.

Post n°240

In July 2021, the ECB announced that its price stability objective is best served by a 2% inflation target over the medium term. This clear and symmetric inflation target reinforces the buffer against deflation risks and supports the anchoring of inflation expectations.

Post n°239

In July 2021, the ECB announced a new monetary policy strategy. Behind the scenes, staff of the Eurosystem produced a comprehensive and detailed analysis to support the Governing Council. This blog summarises the main outcomes and will provide links to future blogs explaining the background material.

Post n°238

By J.-C. Bricongne, J. Carluccio, L. Fontagné, G. Gaulier and S. Stumpner

The Covid-19 crisis led to a collapse of French exports in April and May 2020. Using customs data, we investigate the role of the performance of individual exporters. Although the number of exporters contracted by roughly a quarter, excluding aeronautics, it was the reduction in exports of the hundred or so largest exporters (representing 36% of French exports before Covid) that accounted for approximately half of the decline observed at the aggregate level.

Post n°237

The ECB’s monetary policy can affect the euro through sovereign spreads. A policy surprise that reduces sovereign spreads during the ECB press conference will lead to an appreciation of the euro. This relationship is generally observed when redenomination risk is high, suggesting that monetary policy counters fragmentation risks, thus supporting the solidity of the euro.

Post n°236

By Jean-Baptiste Gossé, Aymeric Schneider and Roger Vicquéry

The EU post-Covid recovery plan is the largest European-wide fiscal stimulus in 70 years. This post revisits the experience of the Marshall Plan by highlighting the role of structural effects, conditionality design, the need to prepare the plan exit, the influence of fundamentals and the importance of the plan’s success as a vector of European integration.

Post n°235

By Tristan Jourde and Arthur Stalla-Bourdillon

Given the recent outperformance of those sectors best-positioned to accompany the ecological transition, some commentators have voiced fears that a bubble might be emerging in “green” equities. A systematic analysis based on the environmental scores (the “E “in ESG) of over 2,500 stocks in the Datastream Global Equity Index suggests that these fears may be overdone.

Post n°234

By Chloé Zapha and David Fouet

Using out-of-court proceedings to resolve companies’ financial difficulties can help them to recover by preserving their reputation. However, directors seldom use them, partly because of a lack of information available about these facilities. It would be beneficial for small companies to make use of these "crisis exit" restructuring mechanisms, which are designed for them.

Post n°233

By Erwan Gautier, Magali Marx and Paul Vertier

A 1% increase in the price of imported refined diesel ultimately translates into a 0.75% increase in the pre-tax price and a 0.3% increase in the pump price of diesel including taxes in France. The adjustment does not occur immediately but is rapid: after one week, the increase in the pre-tax price is 0.45%, i.e. more than 50% of the final pass-through. Prices respond in the same way to an upward or downward shock.

Post n°228

Does requiring financial institutions to be more transparent about the climate impact of their portfolios encourage them to reduce their investments in the most polluting industries? We study the effect of a French law passed in 2015, the first to impose such an obligation. We show that investors subject to mandatory reporting have significantly reduced their holdings of securities issued by fossil fuel companies, compared to investors not targeted by the law.

Post n°232

By Yannick Kalantzis and Youssef Ulgazi

The recent rise in French inflation is temporary in nature but could last for a few more quarters. It is linked to a normalisation of prices after the lows seen in 2020, and to the increase in industrial goods and energy prices. After reaching a peak on the back of these temporary effects, inflation should come back to below the 2% mark over the course of 2022.

Post n°231

By Florian Le Gallo and Kevin Schmitt

After a sluggish first half of the year, international travel picked up in the summer of 2021. In France, travel receipts amounted to EUR10.6 billion, down 29% compared to the summer of 2019 but up 25% compared to 2020. This rebound can be attributed to travellers from nearby countries. However, French travel spending abroad is also more dynamic, so that the surplus is still slightly lower than in the summer of 2020.

Post n°230

By Daniele Siena and Riccardo Zago 

The occupational composition of the labour market is important for the relationship between prices and unemployment, i.e. the Phillips Curve (PC). The decline of the share of routine jobs can explain 1/4 of the recent flattening of the PC in the European Monetary Union (EMU).

Post n°229

By Nicolas Chatelais

In 2020, the fall in GDP was less pronounced in the United States than in Europe. The restrictions on activity and travel – both imposed and voluntary - linked to the fight against the pandemic, which were greater in France/Italy/Spain, account for more than 40% of the gap with the United States. This factor was amplified by the difference in sectoral specialization (US digital advantage, weight of tourism in Europe). The difference in the level of fiscal support explains less than 20% of the gap.

Post n°227

The pandemic has hit certain economies harder than others as a result of their particular sectoral specialisation. France’s specialisation in aeronautics, for example, explains nearly two-thirds of the decline in its global export market shares in the second half of 2020, and a third of the 8 percentage-point decline over the full year.

Post n°226

By Valérie Chauvin and Pierre Sicsic

In 2020, the current account deficit of the balance of payments reached its highest level since 1982. It was financed by larger purchases of government securities by non-residents than in 2019, amounting to EUR 86 billion, which covered both the current account deficit and the increase in net private sector assets.

Post n°225

By Benjamin Bureau, Anne Duquerroy, Julien Giorgi, Mathias Lé, Suzanne Scott and Frédéric Vinas

Without support measures, the cash flow shocks (on a constant funding basis) experienced by French companies in 2020 would have been generally negative but above all very heterogeneous, including within a single sector of activity. The support measures brought the share of negative (and positive) shocks back to the level of a normal year and reduced their dispersion, although major shocks at both distribution tails were less rare than usual.

Post n°224

By Franck Lemaire, Loriane Py, Jean-Pierre Villetelle and Frédéric Vinas

An analysis of a sample of nearly 180,000 SMEs exposed to the health crisis shows that the vast majority of companies that took on debt in 2020 kept some of this money in cash. In the context of the gradual phasing out of government support, we also assess the extent to which businesses will be able to meet their debt obligations depending on their level of activity.

Post n°223

By Antoine Berthou and Sebastian Stumpner

Lockdowns and more generally restrictions introduced by governments during the Covid-19 pandemic contributed to the disruption of international trade in goods. We show that bilateral trade declined more when lockdowns were initially introduced in Spring 2020 with a higher degree of stringency. Moreover, the quantitative impact of lockdowns on trade weakened in the second half of 2020. This is especially the case of lockdowns implemented in the exporting country, which have little or no significant impact on trade in the second half of 2020.

Post n°222

By Pierre Sicsic

The increase in the French fiscal deficit in 2020 was greater than in 2009 and accompanied by a deterioration in the external deficit. Accordingly, the nation's financing requirements (for households, companies and government) increased in 2020, unlike in 2009, with the financing requirements of financial and non-financial corporations increasing.

Post n°221

By Hadrien Camatte, Théophile Legrand and Quoc-Trieu Le

Assessing investor risk appetite is essential for financial stability and market analysis. This post looks at a risk appetite indicator developed by Banque de France staff and gives insights into its contribution to understanding market impact since the start of the COVID-19 pandemic.

Post n°220

By Thomas Ferrière and Dorian Henricot

The price dynamics of corporate and residential real estate are highly correlated in France, both historically and geographically. The health crisis is firstly an asymmetrical shock affecting primarily the demand for corporate real estate. Nevertheless, we show that a fall in prices in this sector could affect residential property prices, particularly in areas where supply is most constrained.

Post n°219

By Vanessa Doucinet, David Ly and Ghjuvanni Torre

Between the end of December 2019 and the end of March 2021, companies' gross debt increased by EUR 224 billion, while their cash position rose by EUR 215 billion. Based on a first analysis of the 205,392 balance sheets received by the Banque de France, it is possible to break down these overall reassuring figures in more detail: 6 to 7% of the total number of rated companies could face difficulties when the support measures are lifted.

Post n°218

By Julia Schmidt and Olivier Sirello

Since the onset of the pandemic in 2020, euro area residents have sharply adjusted their international portfolio investments. Significant sales of foreign assets in March 2020 were followed by large purchases of foreign securities. At the same time, non-residents have purchased euro area debt securities, especially short-term debt.

Post n°217

Despite significant international financial support, low-income countries (LICs) are likely to be more affected by the crisis than advanced or emerging countries. Strengthening the IMF's financial safety net for LICs is in everyone's interest, in order to prevent these countries from becoming weak links in global risks, such as those related to health or climate change.

Post n°216

By Grâce Constant, Andréa Tran Van Hong and Marie Rouger 

In the face of the Covid-19 crisis, New Caledonia’s economy, which is highly dependent on nickel, is showing some resilience thanks to the buoyant global nickel market, while French Polynesia’s economy is being harder hit by the lockdown measures due to the high weight of tourism. The impact of the crisis is nonetheless being limited by non-market services, which are a key source of resilience in both territories.

Post n°215

By Florian Bonnet, Hippolyte d’Albis and Aurélie Sotura

Over the past century, income disparities per adult between départements have been steadily decreasing. The low-income diagonal, which used to be very marked from the north-west to the south-east, has given way to a "low population density diagonal" which now runs from the north-east to the south-west.

Post n°214

By Mathilde Gerardin and Jean-François Ouvrard

In the Monthly Business Survey (MBS) carried out at the end of February/beginning of March 2021, business leaders were asked about the organisational costs associated with COVID and their ability to pass them on to their selling prices. These costs may be high for some sectors but their ability to pass them on to prices appears to be generally limited. Ultimately, the direct and indirect impact on the general level of consumer prices should therefore be small, between 0.1 and 0.3 percentage point, but these costs could affect the margins of some companies.

Post n°213

By Rafael Cezar and Fabio Grieco

While the principle of a European Carbon Border Adjustment Mechanism (CBAM) has been agreed on, discussions as to its calibration are still underway. This post presents three scenarios in which the calculation of the tax base and the scope of the mechanism vary. These choices have significant consequences: the gains in terms of CO2 reduction can vary by a factor of three, depending on the scenario chosen.

Post n°212

by Sylvérie Herbert, Maria Sole Pagliari and Adrian Penalver

For several decades, advanced economies have seen their borrowing costs decrease, including amid the coronavirus pandemic. This is especially true at the long end of the yield curve. Even long-term bonds issued by some private corporations in the euro area trade at negative interest rates. This decrease in borrowing costs primarily reflects a decline in the natural real rate of interest due to population ageing and slower productivity growth, as well as the more recent compression of the long end of the yield curve resulting from central banks’ bond purchases.

Post n°211

By Benjamin Bureau, Anne Duquerroy, Mathias Lé and Frédéric Vinas (Banque de France), Julien Giorgi and Suzanne Scott (INSEE)

Since the start of the public health crisis, the Banque de France and INSEE have compiled a monthly estimate of the loss of activity in each sector, notably via their monthly economic surveys and their monitoring of high-frequency data. The monthly surveys have proved to be a reliable and almost real-time indicator of the impact of the restrictions, and have on the whole been confirmed by the national quarterly accounts. In parallel, the Banque de France and INSEE have launched a joint project which differs from these surveys but complements them in terms of methodology: using real turnover data for individual firms (measured using VAT returns), they compare ex-post the “activity shock” with a counterfactual of what turnover would have been without the. This makes it possible to carry out an analysis at a more granular level, within individual sectors. This blog post presents the first results of this project, which are consistent with our monthly surveys. They will be supplemented with an ex-post analysis of firms’ cash and financial positions.

Post n°210

By Oustry Antoine, Erkan Bünyamin, Svartzman Romain and Weber Pierre-François

The securities accepted as a guarantee under the Eurosystem collateral framework are not, in aggregate, “aligned” with the climate targets of the Paris Agreement. They can therefore be considered to be exposed to so-called “transition” risks related to climate change. Technically, it would be possible to ensure that the collateral pools pledged by each counterparty are more aligned, but this raises methodological questions.

Post n°209

By Emmanuel Cerclé, Hervé Le Bihan and Michaël Monot

Central banks' balance sheets have grown significantly, as a result of the "non-standard" monetary policies conducted in response to the 2008 crisis and the Covid-19 crisis. Reflecting the net asset purchase programmes in place, they are still expanding. However, over the longer term, their size could stabilise and then gradually decline once inflation has consistently returned to close to its target. Adjusting the size of their balance sheets should nevertheless remain in central banks' toolbox.

Post n°208

By Samuel Bieber

The two-tier system, which has been in place for over a year in the euro area, exempts part of banks' excess reserve holdings with the central bank from negative remuneration. This system aims to support the bank-based transmission of monetary policy. It has not unduly influenced money market rates.

Post n°207

The Covid-19 crisis has had a profound impact on the organisation of labour. Women have been on the front line both in tackling the virus and in looking after their family and relatives in these difficult times. Their participation in the labour market has not been significantly affected, thanks both to public aid policies and to their efforts in balancing their professional and private responsibilities.

Post n°206

By Stefan Gebauer, Jean-François Ouvrard and Camille Thubin

We study the role of precautionary savings in the recent rise in French household savings. Using different approaches, we show that elevated uncertainty contributed to the surge in savings in 2020, notably in the first lockdown. For the whole year, however, uncertainty effects were small compared to the contribution of administrative spending constraints.

Post n°205

By Olivier de Bandt, Jean-Charles Bricongne and Lionel Fontagné

The environment that economic policy makers face today is characterised by both a large amount of uncertainty and a high level of globalisation. This blog post highlights a perception of increasing uncertainty by economic agents when external shocks become more frequent, and a faster transmission of these shocks when the economy is more open, or when traded goods are produced within more sophisticated "value chains". Globalisation has thus heightened the macroeconomic impact of uncertainty on the real economy, amplifying the consequences of international uncertainty shocks.

Post n°204

By Raphaël Cancé, Jean-François Ouvrard and Camille Thubin

The health crisis has caused an unprecedented economic shock. In this post, we describe its different channels using the FR-BDF forecasting model. In 2020, shocks to private domestic demand and to trade performance dominate. In 2021 and 2022, public support is expected to speed up economic recovery, but supply shocks should slow down the rebound.

Post n°203

How would the impact of a European carbon tax on the French economy differ from that in the rest of the EU? The medium-run impact on value added would be 20% lower in France than in the rest of the EU. This divergence would stem more from differences in the sectoral structure of the economy (the weight of those sectors most affected, inter-sectoral flows) than from differences in carbon intensity between homologous sectors.

Post n°202

By Jérémi Montornès and Marie-Baïanne Khder

The authors belonged to the Economic Studies and National Accounts Directorate at Insee when they wrote the article from which this blog post is derived. The authors would like to thank D. Blanchet for his helpful comments when writing the article. They remain solely responsible for any errors and omissions.

Irish GDP growth over the recent period has been strongly influenced by transfers from US multinationals. These transactions have increased since 2015. Changes in Irish GDP and its components now reflect multinationals’ choice of location in addition to cyclical fluctuations.

Post n°201

By Dominique Durant, Kevin Parra Ramirez, Geneviève Toubol

The descriptive data associated with large enterprise identifiers (LEIs) provide up-to-date information on groups’ ownership structure, as well as on the legal form and location of their operations, including those in off-shore financial centres (OFCs). Extending the obligation to have an LEI would thus help to make global financial transactions more transparent.

Post n°200

By Ivan Odonnat

Interest rate benchmarks, which are used to price money-market instruments as well as numerous financial contracts (bank overdrafts, real estate loans, bond debt, etc.), are only relevant if they are reliable and representative of the actual financing conditions experienced by economic agents. At the global level, they underpin some USD 350 trillion worth of financial instruments and contracts.

Post n°199

By Antonin Bergeaud and Simon Ray

The health restrictions put in place in France and the rest of Europe have obliged firms and workers to resort to teleworking on a massive scale. By breaking down some of the existing barriers to home-working, this shock will probably mark a turning point in the use of teleworking. This in turn has major implications for workers, businesses and the economy.

Eco Notepad celebrated its fourth birthday in December 2020: we’ve published nearly 200 posts in English and French and our readership keeps on growing! 2020 was a reminder of just how important it is to have rapidly available, relevant information in order to make sense of economic events as they happen.

Post n°198

Teleworking has increased sharply with the Covid-19 crisis and is likely to remain widespread in the future. This could have favourable effects on firms’ productivity, notably through the accelerated diffusion of technologies. However, the academic literature stresses that adequate preparation will be needed in order to reap the full benefits of this favourable impact.

Post n°196

By Valère Fourel, Julien Idier, Valerio Scalone and Aurore Schilte

Unlike the fictitious scenarios used in standard prudential stress test exercises (see post "Bank stress tests: tools for prudential analysis – Episode 1"), the Covid-19 crisis represents an unprecedented adverse scenario. This is an opportunity to draw the first lessons from it: (i) on the resilience of the banking system, as observed for the time being, and (ii) on the improvement of stress-test tools in the light of this experience.

Post n°195

By Valère Fourel, Julien Idier, Valerio Scalone and Aurore Schilte

In order to protect banks from macroeconomic and financial shocks, prudential authorities use a range of risk analysis tools, among them stress tests. What are they? What purpose do they serve? This blog post answers these questions and is accompanied by a second post on the “real-life” stress placed on banks by the Covid-19 crisis.

Post n°194

Digital technologies are often seen as a potential vector for the third industrial revolution. This blog exploits a unique survey by the Banque de France to measure firms’ digitalisation and determine its potential impact on productivity. The use of technologies, which has been stimulated by the Covid-19 crisis, could facilitate and reinforce the economic rebound.

Post n°193

Even though the Fed does not have an explicit financial stability objective extending beyond its supervisory responsibilities, the public speeches of Fed officials reveal that there is a relationship between the higher proportion of speaking time on financial stability topics and more accommodative monetary policy. Financial stability became a topic of concern in Fed speeches especially around the global financial crisis.

Post n°192

By Chloé Zapha

Collective restructuring proceedings could be improved in order to deal effectively with ailing firms. Speeding up the process of corporate debt restructuring - starting with the safeguard procedure - could help as many firms as possible to recover.

Post n°191

Second prize-winning blog in the 2020 Eco Notepad Challenge - By Eugenie Ribault

The lack of waste management remains as harmful to the environment as civil aviation or merchant shipping. Financing these sectors, particularly in developing countries, remains complex: waste recovery is not profitable. How can these difficulties be overcome? What are the long-term benefits, locally and for the planet? This post explores some avenues including alcohol and tobacco taxes as a source of transitional funding.

Post n°190

1st prize-winning blog in the 2020 Eco Notepad Challenge - by Mathilde Salin et Louis Daumas

Less than a generation lies ahead of us to carry out the bulk of the changes needed to attenuate climate change. Such a rapid transition will imply the loss of a significant share of the physical, human and financial capital accumulated in carbon-intensive sectors. We need to acknowledge this loss and look at ways of making it tolerable.

Post n°189

By Nicolas Chatelais and Arthur Stalla-Bourdillon

Despite the corrections at the end of 2018 and the Covid-19 shock, price-earnings ratios remain at high levels, particularly in the United States. However, based on indices adjusted for expected growth and the level of interest rates, this trend does not appear to be the result of irrational exuberance like in previous speculative episodes.

Post n°188

By Olivier Sirello

The coronavirus crisis and decline in economic activity have led to a steep rise in the need for financing. As a result, net issuance of public and private debt securities in the euro area has increased to unprecedented levels. The main buyers are central banks and banking institutions, and, to a lesser extent, non-euro area residents.

Post n°187

By Peter Gubert and Patrick Branthomme

The technology balance of payments (TBP) provides a framework for analysing international technology transfers. After displaying a surplus in 2018, France's TBP stood at equilibrium at the end of 2019. The European Union's TBP shows a surplus comparable to that of the United States.

Post n°186

Preserving companies' investment capacity as they emerge from the Covid-19 crisis is a key issue of economic policy, as shown by the emergency measures taken by the ECB and, in France, by the government. Indeed, access to external financing is a major determinant of investment. A financing shock, such as the 2008 crisis, could lead to a sharp decline in the investment rate of major French groups.

Post n°185

By Sylvie Bonneau

During the lockdown, the Banque de France's network of VSE-SME correspondents was greatly called upon to guide entrepreneurs in their requests for financing. Managers' concerns changed during this period.

Post n°184

By Florian Le Gallo and Kevin Schmitt

The Covid-19 pandemic has severely disrupted international tourism. As foreign traveller surveys are no longer conducted, the Banque de France has brought into play innovative information sources, such as payment card data, to assess the scale of the shock. After a massive drop in receipts since March, European visitors returned to France during the two summer months.

Post n°183

By Luc Jacolin and Khalil Bechchani

Official development assistance (ODA) should be bolstered in 2020 by the international response to the Covid-19 crisis, whose impact in low-income countries is still uncertain. The main challenge is to ensure that the efforts undertaken will be sufficient and sustainable: increasing ODA is desirable if the sustainable development goals for 2030 are not to be compromised.

Post n°182

By Pierre Aldama, Hadrien Camatte, Jean-François Ouvrard and Paul Sabalot

According to the Banque de France macroeconomic projections published on 14 September 2020, after declining by 8.7% in 2020, GDP growth is expected to stand at 7.4% in 2021 and 3.0% in 2022. Despite this apparently impressive rebound, the economic catching-up process should in reality only be very gradual. GDP should only return to its pre-crisis level at the beginning of 2022. This post provides a few explanations of these unusual growth rates.

Post n°181

By Emilie Hermet and Dorothée de Franclieu

In response to the economic impact of the Covid-19 crisis, the European Commission has authorised a temporary easing of the framework governing the use of State aid. While this measure was necessary in an emergency situation, it is likely to distort competition in the internal market if it is used on a wide, prolonged and heterogeneous basis.

Post n°180

By Vivien Levy-Garboua, François Mouriaux, Tatiana Mosquera Yon and Mylène Sabatini

Since the 2008 financial crisis, captive financial institutions (special-purpose financial holding companies), subsidiaries of non-financial corporations (NFCs), have helped to drive growth in the financial sector, causing it to outstrip GDP growth. This trend reflects the increasingly complex and international organisational structures adopted by NFCs, but does not appear to have been accompanied by growth in risky financial transactions by these entities.

Post n°179

While the Covid-19 shock to the world economy is, in many respects, unprecedented, the recovery that is expected could nevertheless be similar to past ones. Reconstruction and sectoral reallocation of activity and employment are processes that take time, and debt is likely to weigh on aggregate demand. The speed of the recovery will therefore depend less on the nature of the shock than on the measures taken to limit its impact.

Post n°178

Are the effects of a fiscal stimulus greater in situations in which central banks are stuck at the zero lower bound (ZLB)? The question is still debated in the economic literature but some empirical evidence suggests that the ZLB per se does not seem to increase the effects of a fiscal stimulus, while economic slack and loose monetary policy do: this bodes well for the fiscal response to the covi19 crisis.

Post n°177

The health crisis has severely impacted global trade and revived debates about the location of production. The widespread onshoring of manufacturing activities would mean abandoning the gains from international specialisation, but without necessarily making value chains more resilient. Given that French companies mainly source their inputs from Europe, a coordinated, EU-wide industrial strategy seems more appropriate.

Post n°176

By Annabelle de Gaye, Cristina Jude

In the wake of the Covid-19 crisis, the US authorities adopted an unprecedented set of fiscal measures, targeting households in particular. These measures aim at preserving the purchasing power of US households, but less than half of this additional income should be spent.

Post n°175

By Raymond de Pastor

The health crisis has left a significant number of businesses in urgent need of cash. In response, public authorities have put in place various support mechanisms, including a scheme to provide State-Guaranteed Loans (SGLs). The credit mediation system is currently helping businesses that have received an initial refusal from a bank in response to their SGL request.

Post n°174

By Barbara Castelletti, Marie Delorme, Pavel Diev, Yannick Kalantzis, Antoine Lalliard and Matteo Mogliani

The COVID-19 crisis has required a real-time monitoring of economic activity, which has not been possible with the usual data. However, by using high-frequency data, such as electricity consumption and credit card transactions, it has been possible to estimate the magnitude of the shock and the timing of the rebound at an early stage, for both industrial production and for household consumption.

Post n°173

By Olivier de Bandt, Sandrine Lecarpentier and Cyril Pouvelle

Bank solvency and liquidity risks mutually interact. Using a model that simultaneously estimates the solvency and liquidity ratios of French banks, it is possible to incorporate them jointly into a stress scenario. It shows that the financial environment has a significant impact, but only in times of crisis, and that solvency has an impact on liquidity, not vice versa.

Post n°172

By Martial Delmas, Lucas Devigne, Emmanuelle Politronacci, Ghjuvanni Torre

The demand for banknotes in the euro area has grown faster than GDP since the creation of the euro. Yet, paradoxically, the use of cash as a means of payment is tending to decline. The increase in the demand for banknotes seems to be mainly due to an increase in precautionary demand from economic agents.

Post n°171


During the lockdown, inflation in France fell sharply while households expected a sharp increase. The profound and sudden change in the structure of household consumption and the strong dispersion of price changes for commonly purchased goods (fresh food, fuel) could explain this unprecedented divergence, which is set to narrow.

Post n°170

US dollar funding costs in foreign exchange markets rose sharply in March 2020 when the supply of US dollars in FX swap markets dried up with the onset of the pandemic. Central banks reacted quickly by activating swap lines, which enabled them to provide US dollar liquidity to banks in their jurisdictions.

Post n°169

Climate policy has so far had limited results despite national commitments under the Paris agreement. Various scenarios establishing a cost-benefit balance of this policy bring to light the main obstacles it is facing. Its net gains are highly significant but remote in time and very unevenly distributed between countries.

Post n°168

With nominal interest rates close to zero, the scope for using conventional monetary policy becomes very limited. However, this liquidity trap does not undermine central banks’ capacity for action. A recent study shows that they can stimulate the economy even in periods of low interest rates, and that they are therefore equipped to act effectively in response to the Covid-19 crisis.

Post n°167

We assess the link between banks' commitments to take climate issues seriously, measured by a climate performance rating based on their declarations, and the changes in their lending in France to greenhouse gas emitting industries between 2010 and 2017. A higher score appears to be associated with lower growth in lending to large enterprises in the five most carbon-intensive industries. However, lending to SMEs is not affected.

Post n°166

The Eurosystem responded quickly to the COVID-19 crisis, deploying significant measures to support the provision of financing to the economy through the bank lending and market financing channels. The measures take three forms: credit operations have been adjusted and extended, collateral easing measures have been introduced, and securities purchase programmes have been strengthened.

Post n°165

Sharp increases in government debt have occurred in post-war periods. While inflation, albeit at times moderate, was the norm in the 20th century, this had not occurred in previous centuries, even though wars had led to similar increases in public debt. One of the reasons for this is that this debt was set aside in a sinking fund for repayment at a later date.

Post n°164

The Covid-19 pandemic has prompted lender-of-last-resort interventions and massive asset purchases by central banks. Such responses are all the more necessary since the transmission of monetary policy to the real economy is asymmetric. Evidence suggests that the effects of an expansionary monetary policy are more limited than those of a contractionary policy. One reason lies in the existence of downward bank lending rate rigidity.

Post n°163

A pandemic is the type of challenges that can only be overcome by global action. Despite a pre-crisis context fraught with geopolitical and trade tensions, this necessary international coordination has been achieved in the economic field. However, the post-crisis phase will exacerbate conflicts of interest and constitute a "stress test" for multilateralism.

Post n°162

Is central bank money “magic money” that could avoid issuing government debt or extinguish existing debt? This blog explains what is central bank money, how it is created, and the relationship between central bank and government finances. There are no easy options to avoid paying for fiscal deficits.

Post n°161

History remembers Roosevelt for pulling the United States out of the Great Depression. He did it through communication – responding to the concerns of the American people – and by changing economic policy. His goal? To break out of the vicious circle in which pessimism amplifies a recession. Although the crises may differ, this blog looks at the lessons that we can learn from this strategy for the current crisis.

Post n°160

By Mathilde Gerardin and Martial Ranvier

Using the additional comments collected at the end of the monthly business survey for March, we used text mining to construct indicators of how firms are adapting to the lockdown (short-time work, teleworking, etc.). This information provides an overview of the way industry-specific organisational structures are being adapted, and both confirms and expands on the findings of the survey.

Post n°159

The current recession is expected to be shallower than the Great Depression of 1929, but deeper than the Great Recession of 2008. It could be shorter than these two financial crises because of the temporary and exogenous nature of the shock that caused it. It could contribute to the deployment of the digital economy, thereby boosting productivity and growth.

Post n°158

By Clémence Berson, Hadrien Camatte and Sandra Nevoux 

The short-time work mechanism has recently been bolstered to limit the repercussions of the Covid-19 pandemic on employment. By preventing dismissals due to temporary difficulties, the reduction in hours worked allows firms to preserve their human capital and will foster the resumption of activity. Certain windfall effects should nevertheless be avoided, outside crisis periods, even though they generally remain minor compared with the benefits of such schemes during times of crisis.

Post n°157

Covid-19 is a public health emergency. Economic activity has been suspended due to the necessary confinement measures taken almost everywhere in the world. The targeted policies of major central banks to address this economic crisis share many common features but differ in details and labels.

Post n°155

What would the economic cost of a systemic firm going bust be? This post addresses this question by assessing the recessionary effect of a systemic default. Within two years, such an event is expected to be followed by a 3% decrease in aggregate consumption and by three more systemic defaults.

Post n°154

By Nicoletta Berardi, Guillaume Gaulier, Karine Jean, Dominique Nivat & Soledad Zignago

The procedure for dealing with overindebtedness has been in existence for 30 years. Women have long been more vulnerable to it than men. In recent years, the overindebtedness procedure has affected the most financially vulnerable individuals, notably women raising children on their own. They account for 26% of overindebted women, almost three times their share in the total female population.

Post n°153

The United States has undergone significant macroeconomic changes over the past 30 years. Economic growth has been on a downward trend (except between 1995-2005), the labour share fell sharply in the late 1990s and sectoral concentration has increased to particularly high levels. These profound changes have been driven by the spread of information and communication technologies that have radically altered the structure of the market.

Post n°152

By Emilie Candus and Jean-Luc Le Goff

2019 saw very significant growth in labelled funds. With subscription rates higher than the industry average and broadly comparable levels of performance, the label is proving to be a factor of attractiveness for investors. However, the success of the labels is uneven and their penetration in the landscape of French collective investment management remains limited. Further educational and promotional efforts are still needed to step up the distribution of these products among savers.

Post n°151

Over the cycle, monetary policy can be redistributional. Lower interest rates boost asset prices and lower borrowing costs but also increase employment and wages. But in the long run, monetary policy does not have systematic distributional effects; intergenerational transfers, globalisation, taxes and technological changes are the key fundamental drivers of inequality.

Post n°150

The Taylor rule provides a natural paragon of short-term nominal interest rates, albeit one that is subject to considerable uncertainty. This post quantifies this uncertainty and shows how this quantification contributes to monetary policy assessment. It shows that, in 2019, short-term interest rates in the euro area were close to the middle of the benchmark interval thus obtained.

Post n°149

By Stéphanie Lange-Gaumand (French Embassy in Japan), Baptiste Meunier and Brieuc Monfort (Sophia University, Japan, and FFJ-EHESS)

Japan is a special case in that it is one of the first countries to face an ageing population. It is also unique in terms of the magnitude of this demographic: the proportion of people over 65 years old is the highest in the world and its population is expected to fall by 40% by 2100. Japan seems to have accepted this population decline and has focused on controlling welfare spending, which reflects national preferences.

Post n°148

By Antoine Lalliard, Julien Le Roux, Marie Delorme and William Honvo

This post proposes a measure of property purchasing power by calculating the floor area in m² that an individual with an average income could buy with a housing loan (excluding deposits) in some of the largest euro area countries. After declining sharply in the 2000s due to rising house prices (with the notable exception of Germany), affordable floor area has increased since the 2008 crisis, mainly thanks to lower interest rates.

Post n°147

By Cyril Couaillier, Dorian Henricot and Julien Idier

At the end of 2018, “at-risk” firms in France were estimated to have total gross debts of EUR 187 billion. A 100 basis-point rise in their cost of financing could push this amount up by 60%, potentially posing a risk to the financial system. This result supports the measures taken by the High Council for Financial Stability (HCSF) as of 2018 to strengthen the resilience of the banking system.

Post n°146

By Patrick Branthomme and Véronique Genre

Three years after the launch of Eco Notepad, a survey has been conducted among its readers to get to know them better and to refine the thematic choices in the coming year. This is an opportunity to present the results and to thank all those who accepted to take part in this satisfaction survey.

Post n°144

By Jean Barthélemy and Eric Mengus

The anchoring of inflation expectations results from an equilibrium between the private sector’s expectations of future central bank actions and the latter's actual actions. This equilibrium is often reduced to the question of a monetary policy rule. While the adoption of a rule helps in the formation of inflation expectations, it is not sufficient to anchor them permanently.

Post n°142

By Bruno Cabrillac and Baptiste Meunier

The net international investment positions (NIIP) of the G20 countries have diverged since 1990. While this divergence results partly from persistent imbalances in goods and services, NIIPs have their own dynamics: the portfolio generates income and capital gains or losses. These dynamics have had a stabilising effect at the cost of financial risks for some debtors, i.e. the United States, and an excessive accumulation of safe assets by some creditors.

Post n°141

1st prize-winning blog in the 2019 Eco Notepad Challenge - By Nicolas Laine (ESCP)

The technological revolution raises numerous questions as it permeates every aspect of our daily lives. Real hopes or legitimate concerns? To separate true from false, let’s take a look at this conversation between two friends, overheard in rue Croix des Petits Champs…

Post n°140

By Florian Lalanne and Irena Peresa

Responding to China’s greater capital account openness, major investment indices have started incorporating renminbi-denominated securities. This is expected to support portfolio inflows into China and increase the correlation between domestic asset prices and external factors. The consequences for other emerging markets are uncertain.

Post n°139

While the duration of an expansion can intuitively be associated with its age, a study of historical GDP data for the euro area reveals that this is not the case. Old economic expansions are as likely to disappear as new ones. Like J. R. R. Tolkien's Elves, expansions are "biologically immortal": they do not die of old age, but of exogenous causes.

Post n°138

By S. Avouyi-Dovi and G. Horny

The Banque de France conducts a research patronage policy through partnerships and the action of its Foundation. The partnerships are collaborations with French research institutions, while the Foundation promotes research work by awarding grants and various prizes to researchers in France and abroad. What does the Banque de France’s research patronage consist in?

Post n°137

By Patrick Branthomme and Laurent Paul

Launched in September 2013 by the Chinese authorities, the “new silk road” project aims to better connect Asia and Europe. The latter must defend its economic interests and the multilateral framework to the best of its ability. To this end, it will be able to draw on the recent progress of the G20, which has established principles for the transparency of financing, the quality of infrastructure and compliance with environmental and corporate social responsibility standards.

Post n°136

By Barbara Castelletti-Font, Pavel Diev and William Honvo

Severe financial market stress can result in significant errors in the forecasting of quarterly GDP growth. This post focuses on the impact of financial variables on the short-term forecasting of GDP in France. A financial conditions indicator can provide useful qualitative information to the forecaster on the risks associated with the baseline projection.

Post n°134

By Sanvi Avouyi-Dovi, Pierre Bui-Quang et Pierre Sicsic

The primary income surplus has been growing for several years. Since 2010, the increase of around EUR 10 billion in the income of French residents working abroad has been higher than that of direct investment (DI) income. The improvement in the income balance is now driven by employee compensation.

Post n°133

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.

Post n°132

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.

Post n°131

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.

Post n°130

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.

Post n°129

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.

Post n°128

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.

Post n°127

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.

Post n°126

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”).

Post n°125

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.

Post n°124

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).

Post n°123

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.

Post n°122

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.

Post n°121

By Edouard Vidon, Céline Rochon

Cyberattacks have emerged as a major threat, including to global financial stability. By capturing the strategic interaction between cyber criminals and their targets, Game Theory provides valuable policy insights. It highlights the limitations and side effects of uncoordinated deterrence policies, and the importance of information sharing across public authorities. International cooperation is essential. The G7 is leading the way.

Post n°120

By Florens Odendahl (Banque de France)

If we consider that future economic outcomes are inherently uncertain, this gives rise to the notion of economic risk. For instance, what is the probability of a contraction in future GDP growth? Extending this idea to the case of several variables, we can address questions about the joint development of risks to GDP growth and inflation, for example.

Post n°119

By Constant Bourdeloux, Henri de La Guéronnière, Cristina Jude, Astrid Labouret

Leveraged loans are loans extended to highly indebted companies. Their strong growth in the US over the last five years and their packaging into securitised financial products bear a number of similarities with the subprime market that triggered the 2008 crisis. While the comparison is debatable, the risks posed by the leveraged loan market to financial stability should not be ignored.

Post n°118

By Liang Bai (University of Edinburgh) and Sebastian Stumpner (Banque de France)

In recent years, the share of US expenditure on imports from China has increased rapidly. Using detailed consumption data from US households for the period 2004-15, we estimate that, due to Chinese penetration, prices of consumer tradable goods have grown by roughly 0.2 percentage point less per year. Other things being equal, this translates into a reduction in the cost of living of roughly USD 200 per household in 2015.

Post n°117

By Jade Al Yahya (Banque de France)

Since 2018, the ACPR and the AMF have studied how financial institutions adjust their business practices to demographic ageing. Senior consumers are particularly likely to experience vulnerability. Yet, according to preliminary results, a commercial offer based solely on an age criterion, the most commonly used today, is far from satisfactory.

Post n°116

Monetary policy decisions require a prior assessment of different economic scenarios, including the most extreme ones. Assessed on the basis of the Banque de France's Financial Conditions Index, financial risks that are likely to weigh on the distribution of future euro-area GDP growth appear limited.

Post n°115

By Guillaume Gaulier (Banque de France), Aude Sztulman (Paris-Dauphine University) and Deniz Ünal (CEPII)

The weakening of global value chain dynamics is considered as one of the causes of the slowdown in world trade since the 2008 crisis. However, measured as the share of trade in parts and components in the volume of world trade, and given the evolution of the business cycle, the development of international value chains continued after the crisis.

Post n°114

By Laurent Abraham and Jean-Baptiste Gossé (Banque de France)

On its 20th anniversary, the euro is enjoying remarkably high levels of support. However, a paradox exists in public opinion: each country appears to believe that the single currency is more beneficial for the other countries. Improving the functioning of national and European institutions could mitigate this paradox and strengthen attachment to the euro.

Post n°113

By Grégory Levieuge (Banque de France)

A credible central bank can more easily anchor agents’ expectations, and therefore long-term interest rates. Thus credibility would reduce the need to make an intensive use of key rates. There is indeed an inverse relationship between credibility and interest rate volatility.

Post n°112

By Sophie Guilloux-Nefussi, Sophie Haincourt, Edouard Jousselin (Banque de France), and Anne Perrot (Council of Economic Analysis - CAE)

The growing role of global digital players with innovative business models is shaking up traditional markets. Does the digital economy constitute a fundamental break with the industries of the past? In theory, the economic principles underlying competition policy still stand. But given the acceleration of network effects and the use of vast quantities of personal data, competition authorities must adapt their control tools and improve their digital skills.

Post n°111

By Marie-Anne Rouquier

Eco Notepad extends the scope of its analyses to France’s regions with contributions from the Bank’s network. Thus, occasionally, Eco Notepad will feature posts devoted to an analysis of an industry, a local economic institution or a product of a particular region. This post is the first of its kind.

Salt is a precious commodity, essential for human beings. Used throughout history as a currency of exchange and a means of payment, it was a key product of the economy until the 19th century. Thanks to its saltworks, Franche-Comté enjoyed remarkable prosperity for over a thousand years by mining the "white gold" of its subsoil. Now restored and reconverted, they have been given a new lease of life.

Post n°110

By Gilbert Cette, Jimmy Lopez and Jacques Mairesse

The positive effect on productivity of reducing product market regulation and employment protection legislation has been extensively documented and analysed, leading to many structural reforms in OECD countries. On the basis of new measures of rent creation and rent sharing, we show that further product market deregulation could substantially increase productivity, notably in France and Italy.

Post n°109

The US Tax Cuts and Jobs Act implemented in 2018 impacts both the domestic and the international activity of US corporates. Nevertheless, the corporate tax cut has only had a transitory effect on the composition of US foreign direct investment income, without having so far delivered any significant improvement in the trade balance.

Post n°108

The banking sector assesses the credit risks associated with borrowers. What are the consequences to be expected from the production of information by a third party? Exploiting a change in the rating methodology of the Banque de France, this post shows how the disclosure of more detailed information on companies can increase the supply of credit for their benefit.

Post n°107

To mark International Women’s Day, the Banque de France organised a roundtable on 7 March on the economic impact of gender inequalities, with the participation of Sylvie Goulard, Deputy Governor of the Banque de France, Isabelle Hudon, Ambassador of Canada in France, and Peter Praet, member of the Executive Board of the European Central Bank. This post echoes these discussions, and concludes that there is urgency to act at all levels.

Post n°106

By Grâce Constant, Elisabeth Fonteny and Meghann Puloc’h

The blue economy encompasses all economic activities related to oceans, seas and coasts. Thanks to its overseas territories, France has the second largest marine zone in the world. World population growth and trade contribute to the development of the blue economy, which can be a driver of sustainable and innovative growth for Overseas France provided certain structural constraints are overcome.

Post n°105

By Jean-Baptiste Gossé (Banque de France) and Roger Vicquéry (London School of Economics)

A federal unemployment insurance scheme has been in place in the United States for more than 80 years. It has helped to cushion the effects of successive crises without the need for large fiscal transfers between American states. It provides an example of an unemployment insurance model based on temporary transfers and subsidiarity between federal and state governments.

Post n°104

By John Hutchinson and Arthur Saint-Guilhem

For several decades, the wedge between the return on capital and risk-free rates has been growing in the euro area and the United States. We examine the drivers of this wedge and find that while the risk premium is the main driver, mark-ups also play a role. More recently, the contribution from mark-ups has decreased in the euro area and increased in the United States.

Post n°103

By Rafael Cezar and Florian Le Gallo

The European Union’s exchanges with the United States generate a significant trade surplus but are also characterised by a substantial foreign direct investment deficit. This deficit reflects certain choices made by multinational firms with regard to their activities’ locations, particularly the placing of US subsidiaries in Europe. We propose an interpretation of these transatlantic exchanges using an aggregate that is broader than the balance of goods and services alone.

Post n°102

By Thomas Ferrière and Laure Frey

Household mortgage debt can jeopardise financial stability, as the 2008 crisis showed. This risk is often assessed using the ratio of the loan amount to the value of the financed property, or loan-to-value ratio (LTV). Yet, very high LTVs cover in large part the property purchases, excluding primary residences, of households with the highest incomes, which are not necessarily the most risky. Therefore, this ratio by itself is insufficient to provide the full picture.

Post n°101

By Ludivine Berret, Bruno Cabrillac and Céline Rochon

G7 countries activated several economic policy levers to respond to the 2008 crisis, in particular monetary and fiscal policy. As a result, their ability to stimulate the economy or deal with future crises has been reduced. Consequently, the temptation to conduct beggar-thy-neighbour policies, despite their harmful effects, could be exacerbated. Even though its weight in global GDP has declined significantly since the late 1980s, the G7—whose presidency is held by France in 2019—remains the appropriate forum for curbing this temptation.

Post n°100

Financial conditions are not fully captured by the short-term interest rate, especially when it is stuck at its lower bound. As a result, financial institutions and central banks turn to other indicators richer in information such as financial condition indices (FCI). We provide a new FCI with time-varying component weights which pinpoints the sources of changes in financial conditions.

Post n°99

By Pierre Guerin, Adrian Penalver and Pierre-Francois Weber

Excess liquidity in the euro area has risen by less than the liquidity created by unconventional monetary policy measures. This is because much liquidity has been absorbed by non-monetary deposit accounts held by national central banks. As monetary policy normalises, liquidity will become scarcer. At what point this scarcity will cause interbank rates to drift above the deposit facility rate will depend on whether this “autonomous” demand remains high.

Post n°98

After the ECB’s Governing Council Monetary policy meetings, market uncertainty has systematically fallen. It has done so even more in the past years. In particular, announcements related to asset purchases had a strong dampening impact on market uncertainty. This suggests that, despite the increasing complexity of unconventional policies, the ECB has been successful in communication.

Post n°97

By the Eco Notepad editorial team

Eco Notepad celebrated its second anniversary in December 2018. This is an opportunity to look back on this rich period in which we published almost 100 blog posts analysing economic and monetary developments. The posts on inflation, monetary policy and financial stability attracted a great deal of interest from our readers, as did those on growth and global trade, the deindustrialisation of the French economy and the increase in the number of monopolies in the United States. Let’s take a closer look.

Post n°96

The share of inheritance in aggregate wealth has varied significantly over time. Indeed, it depends on economic and demographic conditions that are not constant. The share was very high during the 19th century and until the First World War. After an abrupt decline, it is now rising in several countries.

Post n°95

By Jean Dalbard, Hervé Le Bihan and Raphaël Vives

At its meeting of 13 December 2018, the ECB Governing Council confirmed that it would stop the net asset purchase programme begun in late 2014 at the end of this year. Quantitative easing nonetheless remains in place: it depends primarily on the stock of assets held by the Eurosystem rather than on the flow of purchases. This stock will remain unchanged for as long as the Eurosystem continues to reinvest the proceeds from maturing securities.

Post n°94

By Clément Mazet-Sonilhac and Clément Malgouyres (with Juan Carluccio and Thierry Mayer)

The diffusion of information and communication technology (ICT) is considered to be a factor for economic growth, notably in developed countries. In particular, the diffusion of broadband internet could improve firms’ ability to find trading partners abroad as well as products suited to their needs. In France, the roll-out of broadband between 1998 and 2008 corresponds to a substantial improvement in firms’ imports.

Post n°93

By Vincent Grossmann-Wirth and Benoît Hallinger

The Eurosystem’s non-standard monetary policy has led to a significant build-up of excess liquidity in the euro area banking system, concentrated among a few countries. Since 2015, this concentration can mainly be explained by the Eurosystem’s asset purchase programme (APP) and the geographical location of the accounts and settlement circuits used in its implementation.

Post n°92

By Silvia Gabrieli and Claire Labonne

Between 2011 and the announcement of Outright Monetary Transactions (OMTs), high rates of non-performing exposures to peripheral countries hindered banks’ access to the interbank market. Sizeable holdings of peripheral countries’ sovereign bonds also increased the price paid for interbank funding. The introduction of OMTs in 2012 and Targeted Longer-Term Refinancing Operations (TLTROs) in 2014 successfully curbed these channels of fragmentation risk.

Post n°91

By Gilbert Cette and Ombeline Jullien de Pommerol

The diffusion of information and communication technology (ICT) and the associated benefits in terms of growth appear to have petered out at the start of the 2000s in advanced countries. This suggests we are experiencing a pause in the third industrial revolution, ahead of the incipient shock linked to the digital economy.

Post n°90

By Adrien Boileau and Olivier Gonzalez

The Economic Modernisation Act has reduced payment periods, by capping them, for the most part, at 60 days. Today, average payment times are stable, but late payments continue to weigh on the cash flow of businesses, which seem unwilling to pay their suppliers faster so as not to weaken their solvency. Yet reconciling these two goals is possible.

Post n°89

By Baptiste Meunier

Despite full employment, Japan is struggling with wage stagnation. Although this "enigma" can in part be explained by cyclical factors - subdued productivity and inflation expectations - it is also being exacerbated by structural factors linked to the country’s social model, notably the duality of its labour market. As a result, the prospects for a rise in wages and hence inflation remain limited.

Post n°88

Women are underrepresented in central bank governance. In 2018, only 11 out of 173 central banks are headed by a woman. The ethical case for gender rebalancing in central bank governance is a sufficient reason alone, but we could go further and provokingly ask whether women have a different leaning to monetary policy objectives than men? An investigation of former and present US Fed policymakers suggests that this is not necessarily the case.

Post n°87

By Stéphane Dupraz

Several prominent experts in US central banking have recently advocated a new policy framework: price-level targeting. What is it and what advantages and disadvantages does it offer over the current inflation targeting framework? Its main benefit would be to bring the policy of keeping interest rates low for some time after a recession – an unconventional policy tool used in fighting the last recession – into a conventional policy framework.

Post n°86

By Laurent Ferrara and Charles-Emmanuel Teuf

What role does the international environment play in shaping US monetary policy decisions? To measure its influence, we construct an international indicator extracted from minutes of Fed monetary policy committee meetings. In a Taylor rule model, we show that the indicator has a significant and negative impact on the fed funds rate. Discussions centred more on the international environment may thus be associated with greater monetary policy easing.

Post n°85

By Hadrien Camatte and Jean-François Ouvrard

According to the May 2018 revised national accounts, the net borrowing of non-financial corporations improved slightly over the previous 10 years to 0.4 pp of GDP in 2017. This mainly reflects the sharp reduction in net financial expenses, while the share of compensation of employees and gross investment in value added increased.

Post n°84

Foreign direct investment (FDI) inflows are often considered a complement to domestic savings that facilitate the financing of local investment projects. However, as a result of increased competition, they tend to crowd out domestic investment in transition countries in the short term. This effect is mitigated if local financial markets are sufficiently developed.

Post n°83

By Stéphane Lhuissier
The 2008 financial crisis and the sovereign debt crisis in the euro area led to major recessions. By contrast, the macroeconomic impact of the bursting of the technology bubble in 2000 was mild. The reason behind these all-or-nothing effects is amplification: a fragile financial system makes economic agents more sensitive to changes in financial conditions.

Post n°82

Growth in advanced economies has slowed in successive stages since the 1970s. Are we likely to see a return to the growth rates observed in the 20th century? The main uncertainty lies in the pace and diffusion of technological progress. Under a secular stagnation scenario, growth is expected to remain below 1.5% in advanced economies in the period up to 2060, compared with close to 3% in the case of a new technology shock.

Post n°81

By Jean Dalbard and Benoit Nguyen

By December 2018, the Eurosystem will have bought more than EUR 2,500 billion of securities as part of its Asset Purchase Programmes (APP). These purchases are governed by a number of principles, one of which is "market neutrality". This is intended to minimise the potentially distortive effects of purchases on the functioning of the financial markets, while enabling the transmission of monetary policy stimulus to the economy. We demonstrate this in this blog by comparing the Eurosystem's purchasing techniques with those of other central banks.

Post n°80

Given their inflation objectives, the ECB and the Federal Reserve System closely monitor measures of inflation expectations. But what are the available sources of inflation expectations and how is their anchoring measured? This post addresses these questions and focuses on a novel approach to gauging the anchoring of inflation expectations, namely by computing the probability of future inflation being in a range that is consistent with inflation targets.

Post n°79

By Guy Levy-Rueff

The public debt ratios of France and Germany (as a % of GDP) were similar in the early 2000s. Since 2010, the ratio has fallen sharply in Germany, but has continued to rise in France. Using a simple model, we show that the economic and financial context is now favourable to triggering a lasting reduction in France's public debt, provided that efforts to curb public spending are stepped up.

Post n°78

By Hadrien Camatte and Guillaume Gaulier 

The contribution of foreign trade to French growth was strongly negative between 2014 and 2016. Although, on average, the contribution from sectoral specialisation is more positive in France than for its European partners, it also implies a dependence on a limited number of sectors. The difficulties experienced by France's stronghold export sectors explain a large part of the downturn in the French trade balance between 2014 and 2016.

Post n°77

No one wins a trade war. Based on a multi-region dynamic general equilibrium model (GIMF), we show that a global and generalised 10 percentage point increase in import tariffs could reduce global GDP by 1% after two years. This effect could be amplified by a fall in productivity, a rise in the financing cost of capital and a decline in investment demand. Taking all these factors into account could result in lowering global real GDP by up to 3% after two years.

Post n°76

By Julia Schmidt (with Walter Steingress)

Current trade disputes focus on import tariffs. However non-tariff barriers still constitute a large share of barriers to trade. Cross-country harmonisation of product standards reduces these barriers. The trade-enhancing effects of such harmonisation efforts are equivalent to a reduction in import tariffs of 1.8 percentage points, compared to an average applied tariff rate of 2.0% for the European Union.

Post n°75

By Cyril Couaillier and Julien Idier

Financial cycles can be broken down into four phases in which the intensity of financial risks changes. The crisis that follows the downturn is all the more pronounced as risks have accumulated during the upturn. Macroprudential policy aims to limit the impact of financial crises on the real economy: the decision to activate the countercyclical capital buffer in France meets this imperative.

Post n°74

By Françoise Drumetz and Rémy Lecat

Despite persistent high unemployment, recruitment difficulties have already started to arise in France. The current unemployment rate is approaching its structural level, but wages have been relatively sluggish. These pressures partly reflect temporary effects that are common during periods of intense job creation. In the medium term, more effective vocational training would help to lower the level of unemployment at which these pressures begin to emerge.

Post n°73

By B. Cabrillac, L. Jacolin, A. Noah

The intensification of competition in Sub-Saharan African (SSA) countries has had an ambivalent impact on credit risk. The resulting improvement in management and bank intermediation may, beyond a certain threshold, be offset by greater risk-taking. Strengthening prudential frameworks would make it possible to harness the opportunities offered by bank competition.

Post n°72

By Christoph Grosse Steffen (with Marcel Fratzscher and Malte Rieth)

Countries that adopt a strict inflation target experience stronger growth and lower inflation after large natural disaster shocks. Inflation targeting can hence serve as an important shock absorber thanks mainly to a different policy mix. The results indicate that relaxing the inflation targeting regime might generate potential costs, since the stabilisation of future recessions might become more difficult.

Post n°71

By Emmanuelle Politronacci, Elodie Ninlias, Enda Palazzeschi, Ghjuvanni Torre

Within a monetary area, the quantity of banknotes circulating in a given Member State is unknown as banknotes move back and forth across borders and cannot be tracked. There are various estimates but these have the drawback of varying by up to a factor of three. But the issuance of the new series of euro banknotes, combined with surveys, enable these figures to be more specific. Only 10% of the banknotes issued in France are apparently used for transaction purposes in the country.

Post n°70

By Benjamin Bureau and Thibault Libert

In 2016-2017, corporate bankruptcies saw their sharpest drop since 2000. Public discussions often view the impact of corporate bankruptcies purely in terms of their negative short-term consequences, in particular on employment and creditors. However, we show that there may also be more positive medium to long-term effects stemming from resources being reallocated to more productive firms.

Post n°69

Reducing current account imbalances is often equated with curbing excessive exports or imports. However, legacies of the past can develop their own dynamics due to accruing income flows. Indeed, in some countries that have accumulated large foreign liabilities, current account adjustment has been impeded by large negative income flows despite substantial improvements in the trade balance.

Post n°68

By Pierre-Henri Bono, Quentin David, Rodolphe Desbordes, and Loriane Py

Attracting international capital flows and understanding their determinants are major challenges for public policy. The analysis of 140,000 foreign direct investment (FDI) projects carried out between 2003 and 2014 in 3,500 cities worldwide suggests that investing in subway transport infrastructures may be a means to attract more FDI. In this respect, the Grand Paris Express could therefore contribute to bolstering the international attractiveness of the French capital.

Post n°67

By Klodiana Istrefi

Monetary policy nowadays is usually decided by a committee. A narrative approach of the history of the U.S Federal Open Market Committee suggests that the Fed Chair’s economic beliefs and the Committee’s center of gravity of policy preferences matter for decision making.

Post n°66

Central banks have adopted new unprecedented strategies to fight recent financial crises. In the euro area in 2012, one such tool allowed banks to use a wider set of corporate loans as guarantees when they borrow from the Eurosystem. Two recent studies show that this policy has been critical in fostering banks’ lending to firms during the crisis.

Post n°65

By Gilbert Cette and Jean-François Ouvrard

Changes in the value added sharing are the focus of considerable debate. In France, the assessment depends largely on the scope of analysis chosen and the degree to which it is aggregated, and it differs depending on the sector: since the crisis, the labour share has increased in market services but has declined in industry.

Post n°64

By Pierre Sicsic

In France, the gross investment rate of non-financial corporations is trending upwards, and was half a percentage point higher in 2016 than its previous peak of 2007-2008. However, after deducting capital depreciation, the net investment rate, which corresponds to the increase in productive capital, was one percentage point lower than its 2008 peak and equivalent to its mid-2000s level. The acceleration in depreciation stems from the increase in both capital per unit produced and in the average depreciation rate, which is itself linked to the greater share of intangible assets in investment.

Post n°63

Short-time work schemes have been implemented in many OECD countries with a view to protecting jobs in companies experiencing temporary difficulties. While such schemes made it possible to save jobs during the Great Recession of 2008-2009, they may also have adverse effects on the economy. However, these effects would be minimised by sensible reforms.

Post n°62

By Bruno Cabrillac, Ludovic Gauvin, Jean-Baptiste Gossé and Florian Lalanne

In countries with very high public debt, a major shock could prevent the implementation of countercyclical fiscal policies and increase default risk. GDP-indexed bonds would help to mitigate these risks and avoid a costly and disruptive restructuring. A counterfactual analysis of the Greek case illustrates this idea.

Post n°61

The share of imports from low-wage countries in French households’ consumption increased threefold from 1994 to 2014. These less expensive imports lowered inflation in France by 0.17 pp per year on average. This direct effect of imports since 1994 represented a gain of about EUR 1,000 in terms of average household consumption in 2014. However, the indirect effects of opening up to international trade on households’ purchasing power, via wages and employment, were not taken into account.

Post n°60

By Violaine Faubert and Antoine Lalliard

Since 2008, the over-50s are the only age group in the euro area to have seen a steady rise in employment, as a result of population ageing and the increase in the effective pension age. In contrast, the number of those under 50 in work has fallen markedly over the same period, despite a recent stabilisation in the trend. The over-60s are the only group not to have seen an improvement in gross hourly wages between 2010 and 2014.

Post n°59

By Pierre Sicsic

In France in 2016, the gross margin rate of non-financial corporations (NFCs) returned to its early 2000s level, at 32%, while the net margin rate was 15%, compared with 18% in the 2000s. Thus, using aggregates "net" of capital depreciation gives a different picture of the NFCs account. Furthermore, the NFCs' net saving rate would be close to zero, and their stock of fixed capital could only increase through external financing.

Post n°58

This study shows that budget-neutral measures – i.e. changes in the composition of fiscal revenue and spending that leave the ex-ante total government budget unchanged – can boost economic growth. However, not all households are equally affected by these measures. In addition, measures implemented when monetary policy is accommodative have larger macro effects.

Post n°57

By Marie-Élisabeth de la Serve, Sophie Haincourt, Clément Marsilli

Less than two months after the adoption of the Tax Cuts and Jobs Act, which cut individual income tax and corporate tax, US Congress passed a budget agreement that increases public spending for 2018 and 2019. The effects on the US economy represent a two-edged sword: an additional 1.4 percentage point of GDP over two years, but a widening of the trade and budget deficits to 4% and 6% of GDP respectively. The recent dollar depreciation may reflect the growing concerns of international investors

Post n°56

Were it easy to predict financial crises, it would be just as easy for the macroprudential authorities to prevent them. The statistical methods used for forecasting financial crises are greatly improving but have to contend with the fact that such events are (fortunately) rare and occur suddenly. In this article, we discuss the usefulness of early warning systems as well as their limitations on the grounds that the financial system is constantly evolving.

Post n°55

By Benoit Mojon and Xavier Ragot

The weakness of wage inflation may result in part from the increasing participation of older workers in the labour market. Over the last two decades, the participation rate of workers aged 55 to 64 has increased from 33% to 55% on average across OECD countries. We observe that, since 2013, the countries where this increase in labour supply has been the largest have also experienced slower wage inflation.

Post n°54

Certain critics feel that the Eurosystem took excessive risks to fight the crisis by accepting poor quality collateral for its refinancing operations. Exhaustive analysis of the collateral pledged with the central bank disproves these claims. Their quality followed that of assets available on the market and improved significantly after Quantitative Easing was announced.

Post n°53

The US term premium (TP) has been very low by historical standards. Would its sudden rise affect the euro area (EA)? Lower US demand and tighter financial conditions would slow down EA activity. A surprise 1pp increase in US TP could reduce US and EA GDP growth by 0.4pp and 0.25pp respectively. Such effects would be smaller if the monetary authorities were to counteract the fall in inflation.

Post n°52

By Eric Monnet and Angel Gomez

The difference in core inflation between the United States and the euro area is mainly due to housing rents. Since last year’s blogpost on the issue, this feature has become even more blatant: core inflation excluding housing rents is currently lower in the United States than in the euro area, whereas US core inflation is still much higher.