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.
Eco Notepad editors asks authors submitting a post to the blog to confirm that they have no conflicts of interest. If one of the authors of a blog benefits of an external financing, he should state the sources of financial support for the particular research it describes.
In order to assess the quality of its research output, the Banque de France has constructed its own ranking of academic journals in economics and finance. The objective is to encourage the production of research on issues relevant to the Banque de France. This post explains the ten principles underlying the construction of this ranking.
Chart 1: Evolution of the number of authors of academic papers affiliated with one of the Eurosystem central banks on the REPEC website Source: Authors' calculations based on central bank ranking data from the REPEC website
During the Great Depression, bank runs in France were characterised by a flight from banks to savings institutions, which were perceived as safer. Here, we identify and quantify the effects of these bank runs and analyse the conditions that led them to deepen the economic crisis.
Chart 1: Total deposits in banks and savings institutions, 1920-36 Source : Baubeau, Monnet, Riva et Ungaro (2021)
By Hyacinthe Buisson, Henri Fraisse and Matthias Laporte
The increasing use of artificial intelligence (AI) or machine learning (ML) techniques could allow banks to develop new credit risk models. These techniques could lead to substantial reductions in capital requirements. However, the opaque nature of these algorithms and the governance challenges they raise might make their adoption less attractive.
Chart 1: Neural network models could lead to substantial reductions in capital requirements Source: Fraisse and Laporte (2022) forthcoming in the Journal of Banking and Finance.
As part of the first climate pilot exercise, the Banque de France and the ACPR developed a series of models to quantify the financial risks associated with different climate transition scenarios. We present some of the results in this post. In some scenarios, the oil industry's probability of default is expected to increase by 400 bps, its credit spread by 30 bps and its stock market valuation is expected to decrease by 40-50% in 2050.
Chart 1: Changes in probabilities of default for the most affected sectors (PDs in bps in deviation from the orderly scenario) Source: authors’ calculations.
In order to evaluate the financial risks linked to climate change, the Banque de France and ACPR have developed a suite of models that quantify adverse low-carbon transition scenarios for France. While the short-term macroeconomic effect is limited, the key impacts are located at the sector level and are strongly heterogeneous. A second blog post will examine the issue of financial stability.
Chart 1: Impact of disorderly transitions on total and sectoral activity in France in 2050 (compared with an orderly transition) Source: Authors’ calculations
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.
After the 2008 financial crisis, then the 2020 health crisis, will the next global economic crisis be a cyber crisis? Cyber risk is a real threat to the economy and public authorities are mobilised to deal with it. This post presents an indicator used to monitor this risk on a daily basis, based on exchanges on the social network Twitter.
Chart 1 – Evolution of cyber risk over the last decade Source: Twitter and authors’ calculations.
The strong growth of stablecoins - the category of crypto-assets whose market value is supposed to remain stable by being pegged to a reference currency such as the dollar - is increasingly attracting the attention of regulators because of potential risks to financial stability. This post illustrates one of the mechanisms by which crypto-assets could impact financial stability: the growing use of stablecoins could prove destabilising to the short-term debt market in the United States.
Chart 1: Capitalisation of the main stablecoins Source: Coinmarketcap.com, Messari, Bloomberg
Given the recent outperformance of those sectors best-positioned to accompany the ecological transition, some commentators have voiced fears that a bubble might be emerging in “green” equities. A systematic analysis based on the environmental scores (the “E “in ESG) of over 2,500 stocks in the Datastream Global Equity Index suggests that these fears may be overdone.
Chart 1: Trajectory of prices for clean, neutral and polluting sectors Source: Datastream. Scope: World. BdF calculations.
By Benjamin Bureau, Anne Duquerroy, Julien Giorgi, Mathias Lé, Suzanne Scott and Frédéric Vinas
Without support measures, the cash flow shocks (on a constant funding basis) experienced by French companies in 2020 would have been generally negative but above all very heterogeneous, including within a single sector of activity. The support measures brought the share of negative (and positive) shocks back to the level of a normal year and reduced their dispersion, although major shocks at both distribution tails were less rare than usual.
Chart 1. Share of companies with a positive or negative cash flow shock in 2020 Source: Bureau et al. (2021a).