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.
By Sophie Guilloux-Nefussi, Sophie Haincourt, Edouard Jousselin (Banque de France), and Anne Perrot (Council of Economic Analysis - CAE)
The growing role of global digital players with innovative business models is shaking up traditional markets. Does the digital economy constitute a fundamental break with the industries of the past? In theory, the economic principles underlying competition policy still stand. But given the acceleration of network effects and the use of vast quantities of personal data, competition authorities must adapt their control tools and improve their digital skills.
Eco Notepad extends the scope of its analyses to France’s regions with contributions from the Bank’s network. Thus, occasionally, Eco Notepad will feature posts devoted to an analysis of an industry, a local economic institution or a product of a particular region. This post is the first of its kind.
Salt is a precious commodity, essential for human beings. Used throughout history as a currency of exchange and a means of payment, it was a key product of the economy until the 19th century. Thanks to its saltworks, Franche-Comté enjoyed remarkable prosperity for over a thousand years by mining the "white gold" of its subsoil. Now restored and reconverted, they have been given a new lease of life.
The positive effect on productivity of reducing product market regulation and employment protection legislation has been extensively documented and analysed, leading to many structural reforms in OECD countries. On the basis of new measures of rent creation and rent sharing, we show that further product market deregulation could substantially increase productivity, notably in France and Italy.
Chart 1: Expected total factor productivity gains from product market deregulation Sources: Authors’ calculations assuming a switch to the most pro-competitive regulations
The US Tax Cuts and Jobs Act implemented in 2018 impacts both the domestic and the international activity of US corporates. Nevertheless, the corporate tax cut has only had a transitory effect on the composition of US foreign direct investment income, without having so far delivered any significant improvement in the trade balance.
Chart 1. US primary income Source: US Bureau of Economic Analysis (BEA).
The banking sector assesses the credit risks associated with borrowers. What are the consequences to be expected from the production of information by a third party? Exploiting a change in the rating methodology of the Banque de France, this post shows how the disclosure of more detailed information on companies can increase the supply of credit for their benefit.
Chart: Companies with a fine-tuned rating obtain more credit
To mark International Women’s Day, the Banque de France organised a roundtable on 7 March on the economic impact of gender inequalities, with the participation of Sylvie Goulard, Deputy Governor of the Banque de France, Isabelle Hudon, Ambassador of Canada in France, and Peter Praet, member of the Executive Board of the European Central Bank. This post echoes these discussions, and concludes that there is urgency to act at all levels.
By Grâce Constant, Elisabeth Fonteny and Meghann Puloc’h
The blue economy encompasses all economic activities related to oceans, seas and coasts. Thanks to its overseas territories, France has the second largest marine zone in the world. World population growth and trade contribute to the development of the blue economy, which can be a driver of sustainable and innovative growth for Overseas France provided certain structural constraints are overcome.
Chart 1: Variations in the weight of the blue economy in Overseas France in 2015(*) Sources: Insee, ISPF, ISEE, Acoss (**)
A federal unemployment insurance scheme has been in place in the United States for more than 80 years. It has helped to cushion the effects of successive crises without the need for large fiscal transfers between American states. It provides an example of an unemployment insurance model based on temporary transfers and subsidiarity between federal and state governments.
Chart 1. Permanent federal transfers are limited outside periods of exceptional crisis Note: Net annual transfers as a % of GDP. Exceptional crisis: increase of more than 5 percentage points in the jobless rate over 3 years. Sources: authors’ calculations based on NBER, Department of Labor and Bureau of Economic Analysis.
For several decades, the wedge between the return on capital and risk-free rates has been growing in the euro area and the United States. We examine the drivers of this wedge and find that while the risk premium is the main driver, mark-ups also play a role. More recently, the contribution from mark-ups has decreased in the euro area and increased in the United States.
Chart 1: Growing wedge between the return on capital and risk-free rates in the euro area and the United States Source: AMECO, FRED, AWM, and authors’ calculations.
The European Union’s exchanges with the United States generate a significant trade surplus but are also characterised by a substantial foreign direct investment deficit. This deficit reflects certain choices made by multinational firms with regard to their activities’ locations, particularly the placing of US subsidiaries in Europe. We propose an interpretation of these transatlantic exchanges using an aggregate that is broader than the balance of goods and services alone.
Chart 1: An expanded EU-US balance almost in equilibrium (2012 to 2017) Sources: Eurostat (customs data on exports of goods, non-financial services) and BEA (customs data on imports of goods, financial services, foreign direct investment flows). Authors' calculations.
Household mortgage debt can jeopardise financial stability, as the 2008 crisis showed. This risk is often assessed using the ratio of the loan amount to the value of the financed property, or loan-to-value ratio (LTV). Yet, very high LTVs cover in large part the property purchases, excluding primary residences, of households with the highest incomes, which are not necessarily the most risky. Therefore, this ratio by itself is insufficient to provide the full picture.
Chart 1: Lower LTVs for primary residences (% of the 2014 value of the property) Sources: INSEE Household Wealth Survey 2014-2015 and authors’ calculations.
G7 countries activated several economic policy levers to respond to the 2008 crisis, in particular monetary and fiscal policy. As a result, their ability to stimulate the economy or deal with future crises has been reduced. Consequently, the temptation to conduct beggar-thy-neighbour policies, despite their harmful effects, could be exacerbated. Even though its weight in global GDP has declined significantly since the late 1980s, the G7—whose presidency is held by France in 2019—remains the appropriate forum for curbing this temptation.
Chart 1: Reduction of the weight of the G7 in global nominal GDP Source: Datastream and IMF-World Economic Outlook (WEO).