Current economic developments

Post n°32

Cost of equity and corporate profitability in France

Published on 10/04/2017

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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.

Updated on 02/13/2020 12:16
Post n°28

One year after Brexit: where is the UK economy heading?

Published on 08/30/2017

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by Marie-Elisabeth de la Serve and Laurent Ferrara

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.

Updated on 02/12/2020 16:32
Post n°27

Real estate boom and French corporate investment

Published on 08/29/2017

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By Simon Ray, with Denis Fougère and Rémy Lecat

The boom of the 2000s in France stimulated investment by firms with significant real estate holdings (positive collateral channel). Conversely, it was unfavourable to investment by younger firms, with fewer holdings, because of the induced cost (negative profit channel), which justifies the current attention given to the financing of SMEs.

Updated on 02/12/2020 16:23
Post n°4

What are the consequences of the construction crisis?

Published on 08/17/2017

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Eric Monnet and Camille Thubin

Unlike other forms of investment, construction investment in France has still not returned to the levels seen before the 2008 crisis. The drop in construction activity had a significant negative impact on French employment and GDP growth up until 2016. In the case of housing construction in particular, despite a recent upturn, unfavourable demographic factors could again place a drag on investment growth going beyond 2017.

Updated on 02/12/2020 17:02
Post n°23

China: what are the risks related to corporate debt?

Published on 06/27/2017

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By Cristina Jude

The surge in Chinese corporate debt, against the backdrop of declining industrial profitability, is worrying for financial stability in China and beyond its borders. However, the risk of a banking crisis appears to be contained at this stage, although we should remain vigilant.

Updated on 02/12/2020 12:33
Post n°18

Does the High Speed Rail (TGV) infrastructure boost corporate competitiveness?

Published on 05/15/2017

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By Claire Lelarge

The G20 has called for greater investment in infrastructure projects in order to boost growth. One such project, the Train à Grande Vitesse (the TGV – France's high-speed train) allows for corporate productivity gains through reorganisations and increased site specialisation in their areas of expertise. For companies in operation in 2011, this could have represented a positive impact on profit margins of between 0.6 and 1.9 percentage points depending on the industry.

Updated on 02/12/2020 11:18
Post n°10

Exchange rate impact on the US and euro area

Published on 03/15/2017

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By Sophie Haincourt

According to model simulations, the dollar appreciation in effective terms would have choked 0.2 percentage point (pp) off US growth since mid-2014. Meanwhile, the euro depreciation would have added 0.5pp to Euro Area (EA) growth. But since mid-2015 the euro has been appreciating, dampening growth by 0.2pp. Higher openness of the EA, as well as a larger exposure to emerging economies, could be an explanation.

Updated on 02/07/2020 16:15
Post n°8

Global growth: optimism for 2017?

Published on 02/23/2017

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By Laurent Ferrara and Clément Marsilli

According to the Banque de France nowcasting model, global economic growth is likely to increase moderately in 2017: it would expand by 3.3% after 3.0% in 2016. This is in line with the consensus of major international organizations. Since 2011, the International Monetary Fund (IMF) had to revise downwards its global growth projections, but the mid-January update of forecasts brings optimism for global growth this year.

Figure 1: Former global growth forecasts systematically revised downwards Source : IMF
Updated on 02/07/2020 15:47

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