Students, the fith Eco Notepad competition will close on the 17th of July. the Banque de France is inviting students in France to write a post on the theme of "The effects of inflation on households and companies”. The two best posts will be published on this site and will receive a prize of 3,000 and 1,500 euros and a one-year subscription to Pour l'Eco.
Post n°120
Published on 07/09/2019

By Florens Odendahl (Banque de France)

If we consider that future economic outcomes are inherently uncertain, this gives rise to the notion of economic risk. For instance, what is the probability of a contraction in future GDP growth? Extending this idea to the case of several variables, we can address questions about the joint development of risks to GDP growth and inflation, for example.

Figure 1: The central tendency alone does not reflect information about macroeconomic risk
Figure 1: The central tendency alone does not reflect information about macroeconomic risk Source: Adrian et al. (2019) Note: one-year-ahead density forecasts of US real GPD growth.
Post n°119
Published on 07/04/2019

By Constant Bourdeloux, Henri de La Guéronnière, Cristina Jude, Astrid Labouret

Leveraged loans are loans extended to highly indebted companies. Their strong growth in the US over the last five years and their packaging into securitised financial products bear a number of similarities with the subprime market that triggered the 2008 crisis. While the comparison is debatable, the risks posed by the leveraged loan market to financial stability should not be ignored.

Outstanding amount of institutional leveraged loans in the United States and in Europe
Chart 1: Outstanding amount of institutional leveraged loans in the United States and in Europe Sources: S&P LCD and Bloomberg data, Banque de France calculations. Estimates as to the exact size of the market differ due to insufficient data and the lack of a standard definition.
Post n°118
Published on 06/07/2019

By Liang Bai (University of Edinburgh) and Sebastian Stumpner (Banque de France)

In recent years, the share of US expenditure on imports from China has increased rapidly. Using detailed consumption data from US households for the period 2004-15, we estimate that, due to Chinese penetration, prices of consumer tradable goods have grown by roughly 0.2 percentage point less per year. Other things being equal, this translates into a reduction in the cost of living of roughly USD 200 per household in 2015.

China has become the largest exporter of goods to the United States.
Chart 1: China has become the largest exporter of goods to the United States. Source: Authors’ calculations based on data from CEPII and the Bureau of Economic Analysis (BEA).
Post n°117
Published on 06/04/2019

By Jade Al Yahya (Banque de France)

Since 2018, the ACPR and the AMF have studied how financial institutions adjust their business practices to demographic ageing. Senior consumers are particularly likely to experience vulnerability. Yet, according to preliminary results, a commercial offer based solely on an age criterion, the most commonly used today, is far from satisfactory.

Chart 1. Population projection for the European Union by age category.
Chart 1. Population projection for the European Union by age category. Source: Eurostat.
Post n°116
Published on 05/27/2019

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.
Post n°115
Published on 05/23/2019

By Guillaume Gaulier (Banque de France), Aude Sztulman (Paris-Dauphine University) and Deniz Ünal (CEPII)

The weakening of global value chain dynamics is considered as one of the causes of the slowdown in world trade since the 2008 crisis. However, measured as the share of trade in parts and components in the volume of world trade, and given the evolution of the business cycle, the development of international value chains continued after the crisis.

Chart 1: Share of Parts & Components (P&C) in manufacturing world trade in volume
Chart 1: Share of Parts & Components (P&C) in manufacturing world trade in volume Source: Authors' calculations based on CEPII WTFC data (about 5,000 products for the bilateral trade of over 200 countries) and IMF data (world output gap).
Post n°114
Published on 05/06/2019

By Laurent Abraham and Jean-Baptiste Gossé (Banque de France)

On its 20th anniversary, the euro is enjoying remarkably high levels of support. However, a paradox exists in public opinion: each country appears to believe that the single currency is more beneficial for the other countries. Improving the functioning of national and European institutions could mitigate this paradox and strengthen attachment to the euro.

The benefits of the euro are more widely recognised at the European level than at the national level.
Chart 1: The benefits of the euro are more widely recognised at the European level than at the national level. Source: Flash Eurobarometer. Note: Average gap between the perceived benefits of the euro for the EU and for the individual countries, 2011-2018, excluding Latvia and Lithuania due to the period under review. The darker the green, the larger the gap.
Post n°113
Published on 04/26/2019

By Grégory Levieuge (Banque de France)

A credible central bank can more easily anchor agents’ expectations, and therefore long-term interest rates. Thus credibility would reduce the need to make an intensive use of key rates. There is indeed an inverse relationship between credibility and interest rate volatility.

Inverse relationship between credibility and interest rate volatility
Chart 1: Inverse relationship between credibility and interest rate volatility Note: "Credibility" is the indicator proposed by Levieuge & Al. (2018), ranging from 0 (minimum credibility) to 1 (maximum credibility). The conditional variance of the interest rate reflects the volatility of the main monetary policy instrument.
Post n°112
Published on 04/19/2019

By Sophie Guilloux-Nefussi, Sophie Haincourt, Edouard Jousselin (Banque de France), and Anne Perrot (Council of Economic Analysis - CAE)

The growing role of global digital players with innovative business models is shaking up traditional markets. Does the digital economy constitute a fundamental break with the industries of the past? In theory, the economic principles underlying competition policy still stand. But given the acceleration of network effects and the use of vast quantities of personal data, competition authorities must adapt their control tools and improve their digital skills.

Source : www.shutterstock.com (515267014)
Post n°111
Published on 04/11/2019

By Marie-Anne Rouquier

Eco Notepad extends the scope of its analyses to France’s regions with contributions from the Bank’s network. Thus, occasionally, Eco Notepad will feature posts devoted to an analysis of an industry, a local economic institution or a product of a particular region. This post is the first of its kind.

Salt is a precious commodity, essential for human beings. Used throughout history as a currency of exchange and a means of payment, it was a key product of the economy until the 19th century. Thanks to its saltworks, Franche-Comté enjoyed remarkable prosperity for over a thousand years by mining the "white gold" of its subsoil. Now restored and reconverted, they have been given a new lease of life.

Arc-et-Senans site
Arc-et-Senans site Source: Michel Pierre
Post n°110
Published on 03/28/2019

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
Post n°109
Published on 03/21/2019

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).

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