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.
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The occupational composition of the labour market is important for the relationship between prices and unemployment, i.e. the Phillips Curve (PC). The decline of the share of routine jobs can explain 1/4 of the recent flattening of the PC in the European Monetary Union (EMU).
Chart 1: The Slope of the Phillips Curve and Job Polarisation Note: This chart plots the slope of the price PC (1.a) and the routine employment share (1.b) across the EMU. Grey areas represent recessions, blue areas are the 95% confidence interval.
In 2020, the fall in GDP was less pronounced in the United States than in Europe. The restrictions on activity and travel – both imposed and voluntary - linked to the fight against the pandemic, which were greater in France/Italy/Spain, account for more than 40% of the gap with the United States. This factor was amplified by the difference in sectoral specialization (US digital advantage, weight of tourism in Europe). The difference in the level of fiscal support explains less than 20% of the gap.
Chart 1: Factors explaining the gap in GDP variation between the United States and Europe in 2020 Sources: IMF, national, author’s calculations
The pandemic has hit certain economies harder than others as a result of their particular sectoral specialisation. France’s specialisation in aeronautics, for example, explains nearly two-thirds of the decline in its global export market shares in the second half of 2020, and a third of the 8 percentage-point decline over the full year.
Chart 1: Value of goods exports (quarterly national accounts, Q4 2019=100). Source: Quarterly national accounts, data adjusted for seasonal and working-day variations.
In 2020, the current account deficit of the balance of payments reached its highest level since 1982. It was financed by larger purchases of government securities by non-residents than in 2019, amounting to EUR 86 billion, which covered both the current account deficit and the increase in net private sector assets.
Chart 1: financing from the rest of the world by sector (in EUR billions) Source Banque de France
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).
An analysis of a sample of nearly 180,000 SMEs exposed to the health crisis shows that the vast majority of companies that took on debt in 2020 kept some of this money in cash. In the context of the gradual phasing out of government support, we also assess the extent to which businesses will be able to meet their debt obligations depending on their level of activity.
Chart 1: SME cash flow statements for 2019 and 2020 (per EUR 100 turnover) Source: Banque de France, FIBEN database 2019 and 2020, sample of SMEs exposed to the health crisis in 2020. Note: OWCR, Operating working capital requirement + NOWCR, non-operating working capital requirement.
Lockdowns and more generally restrictions introduced by governments during the Covid-19 pandemic contributed to the disruption of international trade in goods. We show that bilateral trade declined more when lockdowns were initially introduced in Spring 2020 with a higher degree of stringency. Moreover, the quantitative impact of lockdowns on trade weakened in the second half of 2020. This is especially the case of lockdowns implemented in the exporting country, which have little or no significant impact on trade in the second half of 2020.
Chart 1: The effect of lockdowns on bilateral trade has become weaker over time in 2020
The increase in the French fiscal deficit in 2020 was greater than in 2009 and accompanied by a deterioration in the external deficit. Accordingly, the nation's financing requirements (for households, companies and government) increased in 2020, unlike in 2009, with the financing requirements of financial and non-financial corporations increasing.
Chart 1: Net lending by sector (in percentage points of GDP) Note: “Companies” refers to financial and non-financial corporations.
Assessing investor risk appetite is essential for financial stability and market analysis. This post looks at a risk appetite indicator developed by Banque de France staff and gives insights into its contribution to understanding market impact since the start of the COVID-19 pandemic.
Chart 1: Risk appetite indicator since early 2020 Sources: Bloomberg, authors’ calculations.
The price dynamics of corporate and residential real estate are highly correlated in France, both historically and geographically. The health crisis is firstly an asymmetrical shock affecting primarily the demand for corporate real estate. Nevertheless, we show that a fall in prices in this sector could affect residential property prices, particularly in areas where supply is most constrained.
Chart 1: annual growth of office and residential real estate prices as a national average, and distribution by département.
Between the end of December 2019 and the end of March 2021, companies' gross debt increased by EUR 224 billion, while their cash position rose by EUR 215 billion. Based on a first analysis of the 205,392 balance sheets received by the Banque de France, it is possible to break down these overall reassuring figures in more detail: 6 to 7% of the total number of rated companies could face difficulties when the support measures are lifted.
Chart 1: Changes in companies’ gross financial debt and cash position Source: Banque de France - Companies Directorate. Key: “sensitive” quadrant, red disk: 11.4% of companies that have not taken out a State-guaranteed loan (SGL) whose gross debt has increased by 22% and cash position has decreased by 33%.
Since the onset of the pandemic in 2020, euro area residents have sharply adjusted their international portfolio investments. Significant sales of foreign assets in March 2020 were followed by large purchases of foreign securities. At the same time, non-residents have purchased euro area debt securities, especially short-term debt.
Chart 1: The euro area has purchased US securities on a massive scale since the second quarter of 2020 Source: European Central Bank.