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°22

Is bond financing a factor of recovery?

Published on 06/16/2017

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Thomas Grjebine, Urszula Szczerbowicz  and Fabien Tripier

The Capital Markets Union project (CMU) recommends diversifying the financing of companies, in particular through debt securities in addition to bank loans. Is the choice of debt instrument important in economic recoveries? In fact, companies replace bank financing by bond financing in a recovery phase. In addition, recoveries are more robust when the share of bond financing is high.

Updated on 02/12/2020 12:25
Post n°21

Business cycles and Taylor rules in the euro area

Published on 06/13/2017

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by Benoît Nguyen

The Taylor rules provide guideline recommendations for policy interest rates based on the deviation between macroeconomic variables and their target or potential levels. They can be calculated for each of the euro area countries. Although significantly divergent at the height of the sovereign debt crisis, there has been a clear convergence since 2014, reflecting the resynchronisation of business cycles in the euro area.

Updated on 02/12/2020 12:14
Post n°20

Economic crises and the lender of last resort

Published on 05/30/2017

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By V. Bignon and C. Jobst

Economic history and wine may contribute to understanding contemporaneous economic issues. The wine crisis caused by phylloxera in the late 19th century helps identify the causal impact of refinancing operations of central banks (CBs) on firms’ defaults. The geographical distribution of the branches of the French CB meant that varying ease of access to discounting bills of exchanges varied when the crisis struck. Regions that benefitted from easier access to central bank refinancing exhibited a lower increase in default rates during the crisis.

Updated on 02/12/2020 11:42
Post n°19

Why Have Interest Rates Fallen far Below the Return on Capital

Published on 05/22/2017

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By M. Marx, B. Mojon and F. Velde

Risk-free rates have been falling since the 1980s while the return on capital has not (Figure 1). In the framework of an overlapping-generation model, Marx, Mojon, Velde (2017) show that these contrasted developments can be mainly explained by an increase in the (perceived) risk on productivity growth. This implies that real rates are likely to stay low for several years.

Updated on 02/12/2020 11:26
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°17

Towards a lasting recovery in euro area inflation?

Published on 05/10/2017

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By Caroline Jardet and Katja Schmidt

Inflation in the euro area (EA) is recovering. This recovery is explained by the sharp rise in import prices since the beginning of the year and by the steady improvement in the economic situation. In the absence of major shocks, inflation is expected to be around 1.8% in 2019 according to a Phillips curve augmented with import prices.

Updated on 02/12/2020 10:54
Post n°16

Capital flows and domestic credit growth

Published on 05/03/2017

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By Ludovic Gauvin, Ramona Jimborean and Julio Ramos-Tallada

The relationship between the rather volatile capital flows and domestic credit has become a major challenge from a financial stability point of view. It is at the origin of the implementation, in some economies, of capital flow management measures. Domestic credit sensitivity to cross-border inflows is amplified by the fixed exchange rate arrangements and the strong presence of foreign banks. The implications for countercyclical policies are significant.

Updated on 02/12/2020 09:44
Post n°15

Has globalization increased business cycle synchronization?

Published on 04/19/2017

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By Eric Monnet and Damien Puy

As the world economic growth is experiencing its first synchronized recovery since the 2007-2008 financial crisis, it is time to investigate again the links between business cycle synchronization and financial openness. Would decreasing international capital movements attenuate co-movements between national cycles? An historical perspective on the matter shows that, contrary to the common wisdom, the periods of lower global financial integration were not associated with lower business cycle synchronization.

Updated on 02/07/2020 17:43
Post n°14

Brexit negotiations: hawks, doves, and chickens

Published on 04/13/2017

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By Edouard Vidon

Game theory provides examples and a few valuable lessons for negotiators, whether hawks or doves, such as the risk of “falling off a cliff” in the “game of chicken”. Investment bank strategists and academics have already started toying with such tools to analyse the Brexit “game”. Surely the negotiators’ war rooms have been paying attention.

Brexit negotiations: the clock is ticking Photo: T. Depenbusch (via wikicommons)
Updated on 02/07/2020 17:29
Post n°13

Stability of the household portfolio since the crisis

Published on 04/06/2017

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By Sanvi Avouyi-Dovi with Vladimir Borgy, Christian Pfister and Franck Sédillot

In the household portfolio in France, the weight of life insurance stabilised at a high level in late 2015. Its previous growth came at the expense of regulated savings and money market mutual funds. This distribution appears to be mainly linked to supply effects, such as financial innovation and tax incentives, beyond the crises, even though there are some breaks in trends around 2008.

Updated on 02/07/2020 17:18
Post n°12

Services prices in France and oil prices

Published on 03/30/2017

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By Louis de Charsonville and Caroline Jardet

Services price inflation in France stood at 1.0% in 2016, well below its average from 1999 to 2015 (around 2%). This paper looks at the mechanisms through which the fall in oil prices and lower headline inflation have contributed to slowing services prices since mid-2014. An analysis of these interactions suggests that services price inflation will begin to recover as of 2017, to around 2%.

Updated on 02/07/2020 16:44

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