Current economic developments

Post n°165

Historical lessons from large increases in government debt

Published on 06/10/2020

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By Vincent Bignon and Pierre Sicsic

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.

Chart 1: Inflation and government debt in the United Kingdom (1700-1950)
Chart 1: Inflation and government debt in the United Kingdom (1700-1950) Source: Bank of England
Updated on 06/10/2020 17:00
Post n°161

The Covid-19 economic crisis: what would Roosevelt have done?

Published on 05/12/2020

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By Jean Barthélemy and Vincent Bignon

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.

Franklin D. Roosevelt during one of his “fireside chats” in1934
Franklin D. Roosevelt during one of his “fireside chats” in 1934 Source: Harris & Ewing, Library of Congress
Updated on 05/12/2020 12:30
Post n°160

How firms are adapting to the lockdown: insights from text mining

Published on 05/07/2020

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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.

Chart 1: Features of the 3 industry clusters
Chart 1: Features of the 3 industry clusters Source: The Banque de France's monthly business survey (MBS).
Updated on 05/07/2020 16:52
Post n°159

Current and past recessions: a long-term perspective

Published on 04/27/2020

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By Antonin Bergeaud, Gilbert Cette, and Rémy Lecat

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.

Chart 1a: The current recession compared to previous ones. Euro Area.
Chart 1a: The current recession compared to previous ones. Euro Area. Source: www.longtermproductivity.com Note: (GDP growth in %, periods of war in dotted lines, IMF forecast in orange)
Updated on 04/27/2020 15:59
Post n°158

Short-time work: a useful tool in times of crisis.

Published on 04/20/2020

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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.

Short-time work: a useful tool in times of crisis.
Chart 1: Development of short-time work in France due to Covid-19 (1 March – 14 April 2020). Source: Dares. Note: In France, the number of requests for short-time work due to Covid-19 amounted to 904,000 at 14 April 2020, representing 8.7 million employees (34% of salaried employment).
Updated on 04/20/2020 16:17
Post n°157

What central banks have done to help the economy survive Covid-19

Published on 04/15/2020

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By Florens Odendahl, Adrian Penalver, Urszula Szczerbowicz

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.

Chart 1: Timeline of central banks’ main responses to the Covid-19 crisis.
Chart 1: Timeline of central banks’ main responses to the Covid-19 crisis. Source: Banque de France.
Updated on 04/21/2020 11:16
Post n°154

Overindebtedness, women and single parenthood

Published on 03/06/2020

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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.

Chart 1: Admissible overindebtedness applications and proportion of women
Chart 1: Admissible overindebtedness applications and proportion of women Sources: Household overindebtedness typological surveys, authors' calculations.
Updated on 03/06/2020 14:53
Post n°153

Falling growth and rising rents in the United States

Published on 02/28/2020

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By Antonin Bergeaud

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.

Source: Aghion et al. (2019). Note: Productivity trends in different sectors in the United States: IT producing, IT-intensive and other sectors.
Chart 1a: Productivity gains and information and communication technologies (in %) Source: Aghion et al. (2019). Note: Productivity trends in different sectors in the United States: IT producing, IT-intensive and other sectors.
Updated on 02/28/2020 15:46
Post n°141

The technological revolution: between hopes and concerns

Published on 11/06/2019

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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…

Source: author, with the help of Ariane Mostamandy (drawings)
Updated on 02/14/2020 12:05
Post n°139

Will the euro area’s economic expansion die of old age?

Published on 10/25/2019

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By Stéphane Lhuissier

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.

Chart 1 - The duration of expansions does not depend on their age
Chart 1 - The duration of expansions does not depend on their age Source: Author's calculations. The Durland and McCurdy (1994) model is applied to the euro area growth rate.
Updated on 02/13/2020 16:28

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