Current economic developments

Billet n°70
Published on 06/05/2018.

By Benjamin Bureau and Thibault Libert

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.

A confirmed decline in the number of corporate bankruptcies in France in 2017
Chart 1: A confirmed decline in the number of corporate bankruptcies in France in 2017 Note: Number of bankruptcies in the year, except for 2018, where the aggregate over the past 12 months at end-February 2018 is used. Source: Banque de France – FIBEN database.
Billet n°68
Published on 05/23/2018.

By Pierre-Henri Bono, Quentin David, Rodolphe Desbordes, and Loriane Py

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.

Chart 1: The number of FDI projects received and size of subways: a positive relationship Source: Bono, David, Desbordes, and Py (2017)
Billet n°65
Published on 05/09/2018.

By Gilbert Cette and Jean-François Ouvrard

Changes in the value added sharing are the focus of considerable debate. In France, the assessment depends largely on the scope of analysis chosen and the degree to which it is aggregated, and it differs depending on the sector: since the crisis, the labour share has increased in market services but has declined in industry.

Chart 1: Labour share in value added (% of the cost of labour in gross value added at factor costs) Source: Insee, authors’ calculations
Billet n°64
Published on 05/07/2018.

By Pierre Sicsic

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.

Chart 1: Real gross and net investment rate in France (NFCs-IEs approximation) Sources: National Accounts tables 6.302 and 6.462. The nominal investment rate of NFCs was 23.3% in 2008 and 2016, table 7.101.
Billet n°57
Published on 03/30/2018.

By Marie-Élisabeth de la Serve, Sophie Haincourt, Clément Marsilli

Less than two months after the adoption of the Tax Cuts and Jobs Act, which cut individual income tax and corporate tax, US Congress passed a budget agreement that increases public spending for 2018 and 2019. The effects on the US economy represent a two-edged sword: an additional 1.4 percentage point of GDP over two years, but a widening of the trade and budget deficits to 4% and 6% of GDP respectively. The recent dollar depreciation may reflect the growing concerns of international investors

Chart1 – United States: federal budget balance and economic cycle since 1960 Sources: Data from the Bureau of Fiscal Service, Bureau of Labor Statistics and CBO; authors' calculations.
Billet n°39
Published on 11/27/2017.

Bruno Cabrillac and Francesco Pappadà

New cross-country evidence shows that VAT compliance is pro-cyclical, and its response to tax-rate hikes is sizeable and negative. Countries with highly sensitive tax compliance have a low ability to reimburse their debt, thus facing higher default risk. Issuing GDP linked bonds may protect such countries from the combined, cyclical risk of growing debt-to-GDP ratios and declining tax revenues.

Billet n°37
Published on 11/13/2017.

By Yannick Kalantzis and Camille Thubin

The share of the manufacturing industry in French GDP has fallen by 9 percentage points over the past forty years. This decline is mainly due to technical progress and consumer preferences. Foreign trade has only played a minor role.

Published on 11/06/2017.

By Guillaume Gaulier and Jean-François Ouvrard

The upturn in economic activity in France has been accompanied by an acceleration in imports. This dynamism reflects the opening up of economies and the cyclical nature of components of demand. Over the medium term, a one-euro increase in demand generates no more than 0.33 euro of imports (their share in GDP); but import growth of two to three percentage points of GDP since mid-2016 remains difficult to explain.

Billet n°32
Published on 10/04/2017.

By Clément Mazet-Sonilhac and Jean-Stéphane Mésonnier

In France, the cost of equity (CoE) faced by non-financial corporations increased sharply during the 2007-2009 and 2011-2012 crises, driven by a surge in the equity risk premium. The COE indeed measures the return required by an investor to acquire or retain a share given its risk. It has often exceeded the return on equity (RoE) since 2007. Since 2016, the CoE has been lower than the RoE for the large listed French non-financial corporations; this encourages productive investment.

Billet n°28
Published on 08/30/2017.

Since the vote on Brexit, the UK economy has shown resilience. However, due to the historically low level of savings rates, investment uncertainty and inflationary risk, we can ask ourselves whether the current growth model of the UK economy is sustainable over the short term.