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.
The results of the 2020 Eco Notebook contest will be announced this autumn. The date and terms of the award ceremony will be communicated later.
Over the cycle, monetary policy can be redistributional. Lower interest rates boost asset prices and lower borrowing costs but also increase employment and wages. But in the long run, monetary policy does not have systematic distributional effects; intergenerational transfers, globalisation, taxes and technological changes are the key fundamental drivers of inequality.
Chart 1: Wealth and income concentration at the top of the distribution in France and in the United States Sources: Garbinti, Goupille and Piketty (2016), Piketty, Saez, and Zucman, (2016), wid.word. Note: Pre-tax national income share held by the Top 1%; net personal wealth share held by the Top 1%.
The Taylor rule provides a natural paragon of short-term nominal interest rates, albeit one that is subject to considerable uncertainty. This post quantifies this uncertainty and shows how this quantification contributes to monetary policy assessment. It shows that, in 2019, short-term interest rates in the euro area were close to the middle of the benchmark interval thus obtained.
Chart 1: Distribution of Taylor rates, 2015-2019 Sources: Eurostat and author’s calculations. Note: The pink areas, from the darkest to the lightest, indicate the 50%, 70%, 80%, 90% and 95% confidence intervals of Taylor rates.
By Stéphanie Lange-Gaumand (French Embassy in Japan), Baptiste Meunier and Brieuc Monfort (Sophia University, Japan, and FFJ-EHESS)
Japan is a special case in that it is one of the first countries to face an ageing population. It is also unique in terms of the magnitude of this demographic: the proportion of people over 65 years old is the highest in the world and its population is expected to fall by 40% by 2100. Japan seems to have accepted this population decline and has focused on controlling welfare spending, which reflects national preferences.
Chart 1 – Contraction and ageing of the population Source: UN forecasts (2019)
This post proposes a measure of property purchasing power by calculating the floor area in m² that an individual with an average income could buy with a housing loan (excluding deposits) in some of the largest euro area countries. After declining sharply in the 2000s due to rising house prices (with the notable exception of Germany), affordable floor area has increased since the 2008 crisis, mainly thanks to lower interest rates.
Chart 1: Floor area affordable on credit in m² by country Sources: Authors’ calculations; Banque de France, OECD, ECB, HouseLev.
At the end of 2018, “at-risk” firms in France were estimated to have total gross debts of EUR 187 billion. A 100 basis-point rise in their cost of financing could push this amount up by 60%, potentially posing a risk to the financial system. This result supports the measures taken by the High Council for Financial Stability (HCSF) as of 2018 to strengthen the resilience of the banking system.
Chart 1: Debt at risk of French groups Source: FIBEN group data and authors’ calculations. Note: ICR = Interest coverage ratio, or the ratio of earnings to interest payments. Net leverage is defined as the ratio of debt net of cash holdings to total equity.
Three years after the launch of Eco Notepad, a survey has been conducted among its readers to get to know them better and to refine the thematic choices in the coming year. This is an opportunity to present the results and to thank all those who accepted to take part in this satisfaction survey.
The anchoring of inflation expectations results from an equilibrium between the private sector’s expectations of future central bank actions and the latter's actual actions. This equilibrium is often reduced to the question of a monetary policy rule. While the adoption of a rule helps in the formation of inflation expectations, it is not sufficient to anchor them permanently.
The net international investment positions (NIIP) of the G20 countries have diverged since 1990. While this divergence results partly from persistent imbalances in goods and services, NIIPs have their own dynamics: the portfolio generates income and capital gains or losses. These dynamics have had a stabilising effect at the cost of financial risks for some debtors, i.e. the United States, and an excessive accumulation of safe assets by some creditors.
Chart 1 – Financial effects and real factors Sources: Lane and Milesi-Ferretti (2017), authors’ calculations
1st prize-winning blog in the 2019 Eco Notepad Challenge - By Nicolas Laine (ESCP)
The technological revolution raises numerous questions as it permeates every aspect of our daily lives. Real hopes or legitimate concerns? To separate true from false, let’s take a look at this conversation between two friends, overheard in rue Croix des Petits Champs…
Source: author, with the help of Ariane Mostamandy (drawings)
Responding to China’s greater capital account openness, major investment indices have started incorporating renminbi-denominated securities. This is expected to support portfolio inflows into China and increase the correlation between domestic asset prices and external factors. The consequences for other emerging markets are uncertain.
Chart 1: Composition of the MSCI Emerging markets index (%). Source: MSCI. Note: The index is composed of equity securities. China A-shares are renminbi-denominated equities traded in Shanghai and Shenzhen, while China offshore shares are mainly traded in Hong Kong.
While the duration of an expansion can intuitively be associated with its age, a study of historical GDP data for the euro area reveals that this is not the case. Old economic expansions are as likely to disappear as new ones. Like J. R. R. Tolkien's Elves, expansions are "biologically immortal": they do not die of old age, but of exogenous causes.
Chart 1 - The duration of expansions does not depend on their age Source: Author's calculations. The Durland and McCurdy (1994) model is applied to the euro area growth rate.
The Banque de France conducts a research patronage policy through partnerships and the action of its Foundation. The partnerships are collaborations with French research institutions, while the Foundation promotes research work by awarding grants and various prizes to researchers in France and abroad. What does the Banque de France’s research patronage consist in?