Current economic developments

05/27/2019

What are the financial risks to euro area growth?

By Naomi Cohen, Laurent Ferrara, Matteo Mogliani and Jean-Guillaume Sahuc

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.

Expected distribution of euro area quarterly GDP growth between 2001 and 2018
Chart 1: Expected distribution of euro area quarterly GDP growth between 2001 and 2018 Sources: Eurostat, Banque de France, authors' calculations.
Updated on 05/28/2019 10:32.
03/28/2019

The impact of structural reform on rent creation, rent sharing and productivity

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.

Chart 1: Expected total factor productivity gains from product market deregulation
Chart 1: Expected total factor productivity gains from product market deregulation Sources: Authors’ calculations assuming a switch to the most pro-competitive regulations
Updated on 03/28/2019 12:16.
03/21/2019

Does the Trump corporate tax reform impact the composition of the US current account?

By Cristina Jude and Francesco Pappadà

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.

Chart 1. US primary income
Chart 1. US primary income Source: US Bureau of Economic Analysis (BEA).
Updated on 03/21/2019 16:13.
02/28/2019

Unemployment insurance: What can we learn from the US system?

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.

Chart 1. Permanent federal transfers are limited outside periods of exceptional crisis
Chart 1. Permanent federal transfers are limited outside periods of exceptional crisis Note: Net annual transfers as a % of GDP. Exceptional crisis: increase of more than 5 percentage points in the jobless rate over 3 years. Sources: authors’ calculations based on NBER, Department of Labor and Bureau of Economic Analysis.
Updated on 02/28/2019 16:22.
02/14/2019

Is the European Union really in surplus vis-à-vis the United States?

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.

An expanded EU-US balance almost in equilibrium (2012 to 2017)
Chart 1: An expanded EU-US balance almost in equilibrium (2012 to 2017) Sources: Eurostat (customs data on exports of goods, non-financial services) and BEA (customs data on imports of goods, financial services, foreign direct investment flows). Authors' calculations.
Updated on 02/14/2019 16:07.
01/30/2019

The G7, an engine for multilateralism

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.

Chart 1: Reduction of the weight of the G20 and the G7 in global GDP
Chart 1: Reduction of the weight of the G7 in global nominal GDP Source: Datastream and IMF-World Economic Outlook (WEO).
Updated on 01/31/2019 10:37.
12/12/2018

Broadband internet changes the geography of international trade

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.

Chart 1: A decade of gradual broadband roll-out
Chart 1: A decade of gradual broadband roll-out Source: Banque de France and authors’ calculations
Updated on 12/12/2018 15:14.
10/18/2018

Have the growth gains from ICT been exhausted?

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.

Chart 1 – Stabilisation of the nominal ICT capital coefficient since 2000
Chart 1 – Stabilisation of the nominal ICT capital coefficient since 2000 Source: authors' calculations using ICT investment data from the OECD.
Updated on 10/19/2018 15:19.
10/11/2018

Does reducing days payable outstandings weaken companies?

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.

Chart 1: Sharp fall in days payable outstandings (DPOs) and days sales outstandings (DSOs) as a result of the Economic Modernisation Act
Chart 1: Sharp fall in days payable outstandings (DPOs) and days sales outstandings (DSOs) as a result of the Economic Modernisation Act Source: Banque de France –FIBEN database, data to October 2017.
Updated on 10/12/2018 10:54.
09/18/2018

Firms' net borrowing improved slightly over the last 10 years

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.

More favourable results for the net borrowing of NFCs using a 2014 base (% of GDP)
Chart 1: More favourable results for the net borrowing of NFCs using a 2014 base (% of GDP) Source: Insee national accounts.
Updated on 09/18/2018 16:30.

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