Post n°91

Have the growth gains from ICT been exhausted?

Published on 10/18/2018

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By Gilbert Cette and Ombeline Jullien de Pommerol

The diffusion of information and communication technology (ICT) and the associated benefits in terms of growth appear to have petered out at the start of the 2000s in advanced countries. This suggests we are experiencing a pause in the third industrial revolution, ahead of the incipient shock linked to the digital economy.

Chart 1 – Stabilisation of the nominal ICT capital coefficient since 2000
Chart 1 – Stabilisation of the nominal ICT capital coefficient since 2000 Source: authors' calculations using ICT investment data from the OECD.
Updated on 02/20/2020 15:56
Post n°90

Does reducing days payable outstandings weaken companies?

Published on 10/11/2018

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By Adrien Boileau and Olivier Gonzalez

The Economic Modernisation Act has reduced payment periods, by capping them, for the most part, at 60 days. Today, average payment times are stable, but late payments continue to weigh on the cash flow of businesses, which seem unwilling to pay their suppliers faster so as not to weaken their solvency. Yet reconciling these two goals is possible.

Chart 1: Sharp fall in days payable outstandings (DPOs) and days sales outstandings (DSOs) as a result of the Economic Modernisation Act
Chart 1: Sharp fall in days payable outstandings (DPOs) and days sales outstandings (DSOs) as a result of the Economic Modernisation Act Source: Banque de France –FIBEN database, data to October 2017.
Updated on 02/20/2020 15:46
Post n°89

Japan: when full employment does not equate to wage growth

Published on 10/09/2018

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By Baptiste Meunier

Despite full employment, Japan is struggling with wage stagnation. Although this "enigma" can in part be explained by cyclical factors - subdued productivity and inflation expectations - it is also being exacerbated by structural factors linked to the country’s social model, notably the duality of its labour market. As a result, the prospects for a rise in wages and hence inflation remain limited.

Croissance des salaires et chômage au Japon
Chart1 – Wage growth and unemployment in Japan Source: OECD
Updated on 02/20/2020 11:04
Post n°88

Central banking at the top: it’s a man’s world

Published on 10/04/2018

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By Klodiana Istrefi and Giulia Sestieri

Women are underrepresented in central bank governance. In 2018, only 11 out of 173 central banks are headed by a woman. The ethical case for gender rebalancing in central bank governance is a sufficient reason alone, but we could go further and provokingly ask whether women have a different leaning to monetary policy objectives than men? An investigation of former and present US Fed policymakers suggests that this is not necessarily the case.

Women are poorly represented in monetary policy decision committees
Figure 1. Women are poorly represented in monetary policy decision committees Note: GC, the Governing Council of the ECB (1998-2018), FOMC, the Federal Open Market Committee of the Fed (1960-2015), MPC, the Monetary Policy Committee of the BoE (1997-2018).
Updated on 02/20/2020 10:55
Post n°87

Price-level targeting: the future conventional policy of the Fed?

Published on 10/02/2018

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By Stéphane Dupraz

Several prominent experts in US central banking have recently advocated a new policy framework: price-level targeting. What is it and what advantages and disadvantages does it offer over the current inflation targeting framework? Its main benefit would be to bring the policy of keeping interest rates low for some time after a recession – an unconventional policy tool used in fighting the last recession – into a conventional policy framework.

Price levels in the United States and the euro area since 1998
Chart 1. Price levels in the United States and the euro area since 1998. The blue and orange lines give the realised evolution of consumer prices in the US and euro area, normalising the 1998 level at 100. The black line gives the counterfactual evolution if inflation had been exactly 2% every year since 1998
Updated on 02/20/2020 10:49
Post n°86

International environment and US monetary policy: a textual analysis

Published on 09/25/2018

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By Laurent Ferrara and Charles-Emmanuel Teuf

What role does the international environment play in shaping US monetary policy decisions? To measure its influence, we construct an international indicator extracted from minutes of Fed monetary policy committee meetings. In a Taylor rule model, we show that the indicator has a significant and negative impact on the fed funds rate. Discussions centred more on the international environment may thus be associated with greater monetary policy easing.

Chart: International environment indicator and major events affecting the global economy
Chart: International environment indicator and major events affecting the global economy Note: The grey areas correspond to major international economic events. Indicator constructed from a textual analysis of FOMC minutes (1993-2017), authors’ calculations
Updated on 02/20/2020 10:43
Post n°85

Firms' net borrowing improved slightly over the last 10 years

Published on 09/18/2018

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By Hadrien Camatte and Jean-François Ouvrard

According to the May 2018 revised national accounts, the net borrowing of non-financial corporations improved slightly over the previous 10 years to 0.4 pp of GDP in 2017. This mainly reflects the sharp reduction in net financial expenses, while the share of compensation of employees and gross investment in value added increased.

More favourable results for the net borrowing of NFCs using a 2014 base (% of GDP)
Chart 1: More favourable results for the net borrowing of NFCs using a 2014 base (% of GDP) Source: Insee national accounts.
Updated on 02/19/2020 18:06
Post n°84

Does FDI crowd out domestic investment?

Published on 09/13/2018

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By Cristina Jude

Foreign direct investment (FDI) inflows are often considered a complement to domestic savings that facilitate the financing of local investment projects. However, as a result of increased competition, they tend to crowd out domestic investment in transition countries in the short term. This effect is mitigated if local financial markets are sufficiently developed.

Domestic investment is crowded out as a result of FDI entry.
Chart 1: Domestic investment is crowded out as a result of FDI entry. Note: Dark blue curve: effect of FDI inflows on domestic investment; red curve: greenfield FDI (creation of a new company ex nihilo); dashed blue line: mergers and acquisitions.
Updated on 02/19/2020 17:58
Post n°83

The economic impact of financial events: an all-or-nothing phenomenon

Published on 09/11/2018

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By Stéphane Lhuissier

By Stéphane Lhuissier
The 2008 financial crisis and the sovereign debt crisis in the euro area led to major recessions. By contrast, the macroeconomic impact of the bursting of the technology bubble in 2000 was mild. The reason behind these all-or-nothing effects is amplification: a fragile financial system makes economic agents more sensitive to changes in financial conditions.

Differences in the impact of an adverse financial shock on euro area industrial production between financial states
Chart 1 – Differences in the impact of an adverse financial shock on euro area industrial production between financial states Note: Impulse responses of industrial production to the financial shock in healthy and fragile financial states. The size of the financial shock is the same in both cases. The dotted line shows the median and solid lines are 68% probability intervals.
Updated on 02/19/2020 17:51
Post n°82

Stagnation or technology shock? The outlook for 21st century growth

Published on 08/30/2018

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By Gilbert Cette and Rémy Lecat

Growth in advanced economies has slowed in successive stages since the 1970s. Are we likely to see a return to the growth rates observed in the 20th century? The main uncertainty lies in the pace and diffusion of technological progress. Under a secular stagnation scenario, growth is expected to remain below 1.5% in advanced economies in the period up to 2060, compared with close to 3% in the case of a new technology shock.

Chart 1: Scenarios for GDP growth up to 2060: Contributions to GDP growth
Chart 1: Scenarios for GDP growth up to 2060: Contributions to GDP growth Source: Cette, Lecat, Ly-Marin (2017) Note: Secular stagnation = Sec. stag.; Technology shock = Tech shock. Annual average % growth 2018-60; contributions in percentage points. The contribution of labour is the total number of hours worked.
Updated on 02/19/2020 17:44
Post n°81

QE in practice: what does market neutrality mean?

Published on 08/28/2018

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By Jean Dalbard and Benoit Nguyen

By December 2018, the Eurosystem will have bought more than EUR 2,500 billion of securities as part of its Asset Purchase Programmes (APP). These purchases are governed by a number of principles, one of which is "market neutrality". This is intended to minimise the potentially distortive effects of purchases on the functioning of the financial markets, while enabling the transmission of monetary policy stimulus to the economy. We demonstrate this in this blog by comparing the Eurosystem's purchasing techniques with those of other central banks.

Chart 1: Structure of French sovereign debt and APP purchases by maturity (March 2018)
Chart 1: Structure of French sovereign debt and APP purchases by maturity (March 2018) Sources: Bloomberg, Arrata and Nguyen (2017).
Updated on 02/19/2020 17:36
Post n°80

Measuring the anchoring of inflation expectations

Published on 08/21/2018

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By Sarah Mouabbi

Given their inflation objectives, the ECB and the Federal Reserve System closely monitor measures of inflation expectations. But what are the available sources of inflation expectations and how is their anchoring measured? This post addresses these questions and focuses on a novel approach to gauging the anchoring of inflation expectations, namely by computing the probability of future inflation being in a range that is consistent with inflation targets.

Figure 1 : Euro area and US measures of the anchoring of inflation expectations (1999-2016)
Figure 1: Euro area and US measures of the anchoring of inflation expectations (1999-2016) Source: Grishchenko, Mouabbi and Renne (2017).
Updated on 02/19/2020 17:30

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