Tous les billets de blog

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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%.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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%.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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…

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.

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.

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.

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.

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.

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.

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”).

“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).

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.