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.
Launched in September 2013 by the Chinese authorities, the “new silk road” project aims to better connect Asia and Europe. The latter must defend its economic interests and the multilateral framework to the best of its ability. To this end, it will be able to draw on the recent progress of the G20, which has established principles for the transparency of financing, the quality of infrastructure and compliance with environmental and corporate social responsibility standards.
Image: land and sea trade corridors of the “new silk road” Source: Hong Kong Trade Development Council (HKTDC) Research
By Barbara Castelletti-Font, Pavel Diev and William Honvo
Severe financial market stress can result in significant errors in the forecasting of quarterly GDP growth. This post focuses on the impact of financial variables on the short-term forecasting of GDP in France. A financial conditions indicator can provide useful qualitative information to the forecaster on the risks associated with the baseline projection.
Chart 1: Relationship between the Country-Level Index of Financial Stress (CLIFS) and GDP growth in France GDP quarter-on-quarter growth, 10% of the obs. with lowest GDP, rest of the obs. Sources: Banque de France, ECB and INSEE
By Sanvi Avouyi-Dovi, Pierre Bui-Quang et Pierre Sicsic
The primary income surplus has been growing for several years. Since 2010, the increase of around EUR 10 billion in the income of French residents working abroad has been higher than that of direct investment (DI) income. The improvement in the income balance is now driven by employee compensation.
Chart 1: A significant improvement in the balance of compensation of cross-border commuters since 2010 Source: Banque de France’s Annual Report on the Balance of Payments. Note: primary income surplus expressed in billions of euro (EUR bn). PI: Portfolio investment; OI: Other investment
Amid slowing growth and corporate deleveraging, State intervention in certain Chinese banks is again on the table. 20 years ago, asset management companies (AMCs) were set up to bolster the largest lenders, but their purpose has radically changed since. To address current bad loan issues, the priority should be to develop the secondary NPL market.
Figure 1: Four AMCs were originally set up to bolster the largest state-owned banks Source: Authors
The trade balance as a share of GDP reflects decisions regarding consumption, and therefore saving, and investment. Over the past 40 years, its dynamics in France have been dominated by the cycle of construction: the balance deteriorates in boom phases. The rise in household saving, which contributed to the surplus of the 1990s, was offset after the crisis by a higher share of government consumption in GDP.
Chart 1: Contributions to the Trade Balance,% of GDP in deviation from 1981 Source: INSEE.
What are French banks and insurers doing to prepare for climate change? Where do they stand in terms of implementing France’s Energy Transition Law? Our analyses show significant though mixed progress with regard to transparency and governance of risks, and a growing but still incomplete recognition of climate risk as a financial risk.
Chart 1: Geographical breakdown of the exposures of French banks Source: ACPR. Note: as a percentage of total outstanding amounts for the 7 main French banks at 30 June 2018
By Philippe Aghion (Collège de France and LSE), Antonin Bergeaud (Banque de France), Richard Blundell (UCL and IFS) and Rachel Griffith (University of Manchester and IFS)
Technical progress forces workers to adapt to new production methods. It thus favours the most highly skilled workers as they earn relatively higher wages than the least skilled. However some less qualified employees can also benefit from these technical changes provided, they have the skills sought after by innovative firms.
Chart 1: Average hourly wage by age and skill level for low-skilled occupation workers in innovative and non-innovative firms Note: Data for the United Kingdom taken from the Annual Survey of Hours and Earnings, matched to the Business Expenditure on Research and Development survey (2004-2016). Hourly wages in GBP on a logarithmic scale. Source: Aghion et al. (2019).
Overall, French prudential policies entail a reduction in foreign banks’ lending to French residents. Yet some measures may lead to undesired leakages that potentially undermine authorities’ goals: foreign bank affiliates’ exposure to France rose by 1.1% (up EUR 1.5 billion) on average over 2011-17 owing to the implementation of Basel capital requirements.
Chart 1: Foreign banks’ exposures to France (as a % of total bank debt of French residents) Source: BIS Consolidated Banking Statistics (CBS) – Immediate Borrower (IB) and authors’ calculations.
The recent inflation dynamics in advanced countries are difficult to understand and forecast. This post looks at the contribution of Consensus Economics Inc. projections in forecasting total one-year inflation in France over the period 2009-2019.
Chart 1: Capturing the inflation trend using Consensus Economics Inc. projections Sources: INSEE, Consensus Economics Inc., author’s calculations. Chart 1: Total inflation (year-on-year HICP), average of one-year inflation projections for year (N+1) of Consensus Economics Inc., and inflation trend for France
The ECB balance of risks for price stability and growth provides useful information on the Governing Council’s assessment of risks to the euro area outlook. Abstracting from unconventional monetary policy measures, an analysis since mid-2003 shows that: i) upside risks to inflation are associated with rate hikes, ii) downward risks to growth with rate cuts, and iii) in the case of conflicting signals, inflation takes priority.
Figure 1. ECB balance of risks and key ECB policy rates Sources: ECB and authors’ calculations. Since Sept. 2014 (vertical dashed line), no comment on inflation risks, except for downside risks from Sept. 2015 to March 2016. The DFR cut of 8 Oct. 2008, reversed the day after, is not shown.
By Ludivine Berret, Marie-Hélène Ferrer and Céline Rochon
In a world marked by reduced fiscal and monetary leeway and heightened risks, a strengthened Global Financial Safety Net is desirable, in addition to better macroeconomic policy coordination. This issue, discussed under the French G7 Presidency, calls for a renewed multilateralism (see the blog on “The G7, an engine for multilateralism”).
Chart 1: Evolution of the size and composition of the Global Financial Safety Net Source: IMF, Adequacy of the Global Financial Safety Net, 2016.
The “Phillips cone” is a range of possible values for inflation obtained using different specifications of the Phillips curve. The Eurosystem’s June 2019 projection for euro area inflation is slightly below the median forecast in the Phillips cone for the entire projection horizon, and even slightly below the cone at the start of the horizon. This suggests that the Eurosystem’s projection is fairly prudent.
Chart 1: The euro area projection is prudent relative to the Phillips cone Source: Eurostat, Eurosystem, authors’ calculations Note: after the first quarter of 2019, the black line shows the Eurosystem’s June 2019 projection.