Eco Notepad features educational articles that present the research, studies and economic expertise of the Banque de France. The blog is aimed at students, professionals, journalists and academics. Some articles will be devoted to analyses carried out by the Bank's branch network, on specific topics. The opinions expressed are those of the authors and do not necessarily reflect the position of the Banque de France, the Eurosystem, or the institutions employing these authors.
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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.
Chart 1: HICP and HICP augmented with imputed rents and with the acquisition price of housing in the euro area (% change year-on-year) Source: Eurostat for the HICP, Banque de France calculations for the augmented HICP. By convention, a weighting of 15% is applied to the price of owner-occupied housing in the euro area.
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.
Chart 1: Shock decomposition – Suppliers’ delivery time and output PMI France Source: Markit, own calculations. Note: Demeaned index value and ppt. contributions, index increase = faster deliveries. Most recent observation: 2021M12.
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.
Chart 1. Public debt to GDP ratio in the euro area and for its largest countries (left hand side axis) and evolution of the Eurosystem balance sheet over GDP (right hand size axis) Source: Eurostat, National accounts, Eurosystem data. Authors’ calculation.
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.
Chart 1: Evolution of loans and debt securities of US non-financial corporations Source: Financial Accounts of the United States, L.103.
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%.
Chart 1: Representation of securities holdings networks for euro area banks and funds. Source: Sydow et al. (2021). Note: Each dot is an entity of all possible sectors. Each line shows that a bank (blue dot) or a fund (purple dot) holds a security issued by another entity.
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.
Chart 1: Dependencies of the securities portfolio held by French financial institutions on ecosystem services Source: Svartzman et al. (2021). Note: 42% of the value of the securities portfolio held by French financial institutions was issued by companies that are highly or very highly dependent on at least one ecosystem service.