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Post n°169
Published on 07/03/2020

Climate policy has so far had limited results despite national commitments under the Paris agreement. Various scenarios establishing a cost-benefit balance of this policy bring to light the main obstacles it is facing. Its net gains are highly significant but remote in time and very unevenly distributed between countries.

Chart 1: Impact on world GDP of global warming and climate policies (as a % of GDP)
Chart 1: Impact on world GDP of global warming and climate policies (as a % of GDP) Source : Alestra, Cette, Chouard and Lecat (2020)
Post n°168
Published on 06/30/2020

With nominal interest rates close to zero, the scope for using conventional monetary policy becomes very limited. However, this liquidity trap does not undermine central banks’ capacity for action. A recent study shows that they can stimulate the economy even in periods of low interest rates, and that they are therefore equipped to act effectively in response to the Covid-19 crisis.

Chart 1 – The effect of monetary easing remains positive in the euro area in ELB times
Chart 1 – The effect of monetary easing remains positive in the euro area in ELB times Source: Lhuissier, Mojon and Jubio-Ramirez (2020). NB: The accommodative monetary policy decision (“monetary policy shock”) corresponds to a fall in two-year sovereign interest rates of the order of 10 basis points.
Post n°167
Published on 06/25/2020

We assess the link between banks' commitments to take climate issues seriously, measured by a climate performance rating based on their declarations, and the changes in their lending in France to greenhouse gas emitting industries between 2010 and 2017. A higher score appears to be associated with lower growth in lending to large enterprises in the five most carbon-intensive industries. However, lending to SMEs is not affected.

Chart 1: Banks’ pro-climate commitments and share of loans to firms in the most carbon-intensive industries in France.
Chart 1: Banks’ pro-climate commitments and share of loans to firms in the most carbon-intensive industries in France. Source: Banque de France, authors’ calculations.
Post n°166
Published on 06/12/2020

The Eurosystem responded quickly to the COVID-19 crisis, deploying significant measures to support the provision of financing to the economy through the bank lending and market financing channels. The measures take three forms: credit operations have been adjusted and extended, collateral easing measures have been introduced, and securities purchase programmes have been strengthened.

Table: main monetary policy decisions taken in March-June 2020
Table: main monetary policy decisions taken in March-June 2020 Source: Banque de France
Post n°165
Published on 06/10/2020

Sharp increases in government debt have occurred in post-war periods. While inflation, albeit at times moderate, was the norm in the 20th century, this had not occurred in previous centuries, even though wars had led to similar increases in public debt. One of the reasons for this is that this debt was set aside in a sinking fund for repayment at a later date.

Chart 1: Inflation and government debt in the United Kingdom (1700-1950)
Chart 1: Inflation and government debt in the United Kingdom (1700-1950) Source: Bank of England
Post n°164
Published on 06/05/2020

The Covid-19 pandemic has prompted lender-of-last-resort interventions and massive asset purchases by central banks. Such responses are all the more necessary since the transmission of monetary policy to the real economy is asymmetric. Evidence suggests that the effects of an expansionary monetary policy are more limited than those of a contractionary policy. One reason lies in the existence of downward bank lending rate rigidity.

Chart 1 - Year-on-year changes in Eonia and bank lending rates in the euro area (per cent)
Chart 1 - Year-on-year changes in Eonia and bank lending rates in the euro area (per cent) Source: Levieuge and Sahuc (2020)
Post n°163
Published on 05/27/2020

A pandemic is the type of challenges that can only be overcome by global action. Despite a pre-crisis context fraught with geopolitical and trade tensions, this necessary international coordination has been achieved in the economic field. However, the post-crisis phase will exacerbate conflicts of interest and constitute a "stress test" for multilateralism.

Chart 1. Measures taken by governments in response to the Covid 19 crisis (as a % of G20+ countries)
Chart 1. Measures taken by governments in response to the Covid 19 crisis (as a % of G20+ countries) Source: IMF, April 2020.
Post n°162
Published on 05/20/2020

Is central bank money “magic money” that could avoid issuing government debt or extinguish existing debt? This blog explains what is central bank money, how it is created, and the relationship between central bank and government finances. There are no easy options to avoid paying for fiscal deficits.

Figure 1: Sovereign debt held by the Eurosystem as % of GDP
Figure 1: Sovereign debt held by the Eurosystem as % of GDP Source : ECB ; Note : last data point 2019 Q4.
Post n°161
Published on 05/12/2020

History remembers Roosevelt for pulling the United States out of the Great Depression. He did it through communication – responding to the concerns of the American people – and by changing economic policy. His goal? To break out of the vicious circle in which pessimism amplifies a recession. Although the crises may differ, this blog looks at the lessons that we can learn from this strategy for the current crisis.

Franklin D. Roosevelt during one of his “fireside chats” in1934
Franklin D. Roosevelt during one of his “fireside chats” in 1934 Source: Harris & Ewing, Library of Congress
Post n°160
Published on 05/07/2020

By Mathilde Gerardin and Martial Ranvier

Using the additional comments collected at the end of the monthly business survey for March, we used text mining to construct indicators of how firms are adapting to the lockdown (short-time work, teleworking, etc.). This information provides an overview of the way industry-specific organisational structures are being adapted, and both confirms and expands on the findings of the survey.

Chart 1: Features of the 3 industry clusters
Chart 1: Features of the 3 industry clusters Source: The Banque de France's monthly business survey (MBS).
Post n°159
Published on 04/27/2020

The current recession is expected to be shallower than the Great Depression of 1929, but deeper than the Great Recession of 2008. It could be shorter than these two financial crises because of the temporary and exogenous nature of the shock that caused it. It could contribute to the deployment of the digital economy, thereby boosting productivity and growth.

Chart 1a: The current recession compared to previous ones. Euro Area.
Chart 1a: The current recession compared to previous ones. Euro Area. Source: www.longtermproductivity.com Note: (GDP growth in %, periods of war in dotted lines, IMF forecast in orange)
Post n°158
Published on 04/20/2020

By Clémence Berson, Hadrien Camatte and Sandra Nevoux 

The short-time work mechanism has recently been bolstered to limit the repercussions of the Covid-19 pandemic on employment. By preventing dismissals due to temporary difficulties, the reduction in hours worked allows firms to preserve their human capital and will foster the resumption of activity. Certain windfall effects should nevertheless be avoided, outside crisis periods, even though they generally remain minor compared with the benefits of such schemes during times of crisis.

Short-time work: a useful tool in times of crisis.
Chart 1: Development of short-time work in France due to Covid-19 (1 March – 14 April 2020). Source: Dares. Note: In France, the number of requests for short-time work due to Covid-19 amounted to 904,000 at 14 April 2020, representing 8.7 million employees (34% of salaried employment).

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