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July 2018

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.

Public debt as a % of GDP in France and Germany under different scenarios
Chart 1: Public debt as a % of GDP in France and Germany under different scenarios Sources: Eurostat for the past, BdF calculations for the future

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.

Chart 1 – Cumulative contributions to growth in the foreign trade coverage ratio for non-energy goods (in %)
Chart 1 – Cumulative contributions to growth in the foreign trade coverage ratio for non-energy goods (in %) Sources: Customs authorities and authors’ calculations.

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.

Chart 1: Impact of a generalised 10 percentage point increase in tariffs on global real GDP
Chart 1: Impact of a generalised 10 percentage point increase in tariffs on global real GDP Source: author’s calculations.

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.

Chart 1: Trade Restrictiveness Index
Chart 1: Trade Restrictiveness Index Source: Overall Trade Restrictiveness Index by Kee et al. (2009). The data used were computed for the year 2009.

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.

The four seasons of the financial cycle
Chart 1: The four seasons of the financial cycle