WORKING PAPERS 2020

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2020-34

Trajectory Based Distributionally Robust Optimization Applied to the Case of Electricity Facilities Investment with Significant Penetration of Renewables

Pierre Cayet, Arash Farnoosh

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Abstract
As large scale penetration of renewables into electric systems requires increasing flexibility from dispatchable production units, the electricity mix must be adapted to brutal variations of residual demand. Using tools from distributionally robust optimization (DRO), we propose a trajectory ambiguity set including residual demand trajectories answering both support and variability criterion using quantile information, and approximate the level-maximizing and variability-maximizing residual demand trajectories using two simple algorithms. These two limiting trajectories allow us to make investment decisions robust to extremely high levels and brutal variations of residual demand. We provide a numerical experiment using a MILP investment and unit commitment model in the case of France and discuss the results.
Mot(s) clé(s)
OR in energy; Uncertainty modelling; Decision analysis; Renewables
2020-33

Do oil-market shocks drive global liquidity?

Yao Axel Ehouman

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Abstract
This paper aims to assess the impact of oil shocks on global liquidity evolution over the 1999–2018 period, an issue not already addressed by literature. To this end, we rely on a two-stage approach that allows us to trace fluctuations in the crude oil price to the underlying supply and demand shocks, on the one hand, and to estimate the responses of global liquidity indicators to these shocks on the other hand. Our results support the existence of a link between oil shocks and global liquidity. In particular, we show that global liquidity responses to oil shocks depend on the shocks’ nature. While aggregate and oil-specific demand shocks have, respectively, negative and positive effects on the evolution of global liquidity, oil supply shocks do not significantly affect global liquidity due to their relatively low contribution to oil price changes. Thus, this paper highlights that oil price movements by driving global liquidity dynamics can be identified as a potential source of financial instability.
Mot(s) clé(s)
Global liquidity; oil price; oil demand shocks; oil supply shocks; Structural VAR.
2020-32

The Fata Morgana of Exchange Rate Regimes: Reconciling the LYS and the RR classifications

Cécile Couharde, Carl Grekou

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Abstract
This paper provides a comprehensive analysis of the disagreements between the two most popular but also discordant de facto exchange rate regime classifications: the Reinhart and Rogoff and the Levy-Yeyati and Sturzenegger classifications. We estimate probabilities of disagreement between the two classifications for the different exchange rate regime categories, and derive a de facto synthesis classification, using the Receiver Operating Characteristic analysis. We show that more than a third of the observations are not directly comparable, and relatively few disagreements are directly attributable to the classifications’ key variables. Most of the disagreements originate from the different thresholds used by the classifications in the definition of the ERR categories and the interactions between several variables. Given these complexities, the synthesis classification provides a useful framework in terms of greater comparability.
Mot(s) clé(s)
Exchange rate regimes; Probit model; ROC analysis.
2020-31

Dependence structure between oil price volatility and sovereign credit risk of oil exporters: Evidence using a Copula Approach

Yao Axel Ehouman

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Abstract
This paper re-examines the dependence structure between uncertainty in oil prices and sovereign credit risk of oil exporters. To address this issue, we employ a copula approach that allows us to capture a myriad of complex and nonlinear dependence structures. Empirical analyses involve daily data of the 5-year sovereign credit default swaps spreads and the crude oil implied volatility from January 2010 to May 2019, covering a sample of ten oil-exporting countries. Except for Brazil and Venezuela, our results provide evidence of significant positive and upper tail dependence in the relationship between oil market uncertainty and oil exporters’ sovereign risk. Overall, our findings highlight that high uncertainty in oil prices coincides with large-scale increases in the sovereign credit risk of oil-exporting countries, supporting the hypothesis that investors, exposed to economic losses from risk events in oil exporters, are all the more pessimistic that prevails high uncertainty about future oil prices. Our findings have implications for oil exporter’ policymakers as well as investors.
Mot(s) clé(s)
Copula; Dependence; Oil market; Sovereign credit risk; Uncertainty
2020-30

How financial markets react to Total’s strategy of becoming a responsible energy major?

Margaux Escoffier

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Abstract
This paper investigates the market reaction to the upstream oil and gas and climate strategy of Total SA. It aims at (i) analyzing whether the market welcomes Total's climate commitment and (ii) comparing investors' reaction to both categories of announcements. By using an event study, our results highlight that the market reacts negatively to both Total's upstream oil and gas and climate strategy. However, the market reacts more negatively to its climate strategy meaning that investors may consider that Total has to do better in terms of climate commitment to mitigate the risk of climate change.
Mot(s) clé(s)
Energy transition; climate strategy; financial markets; event study; oil and gas companies; Total SA
2020-29

Keep Working and Spend Less? Collective Childcare and Parental Earnings in France

Pierre Pora

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Abstract
I leverage the staggered expansion of subsidized childcare facilities across municipalities in response to a succession of national plans to investigate the effect of collective childcare on parents' labor outcomes and childcare choices in France between 2007 and 2015. These plans did not lead to any substantial change in parents' labor outcomes or in paid parental leave take-up. Instead, these collective childcare expansions crowded out more costly formal childcare solutions, such as childminders or at-home childcare. These crowding-out effects highlight a downside of family policy strategies that foster the coexistence of multiple childcare arrangements.
Mot(s) clé(s)
Labor supply, childcare, event-study, parental leave
2020-28

Are European cooperative banks more responsible?

Ouafa Ouyahia

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Abstract
The objective of this paper is to establish a comparison between European cooperative banks and non-cooperative banks in terms of Corporate Social Responsibility (CSR). One of the main limitations of existing studies is their inability to measure and verify the concrete application of the banks' speeches and communications in their actual practices. To remedy this problem, we try in this study to, first, evaluate the banks’ communication, and in a second step, measure the implication of the European banking sector in CSR practices. We also think that it is interesting to see the impact of the recent financial crisis on the practices of banks in terms of CSR. For this, we will consider the years 2008 and 2015. Our data are collected, for the most part, from the annual reports of banks. We have also exported some data from Fitch Connect database. Globally, banks are becoming more transparent. They provide more information in 2015 compared to 2008. Taking into account all the criteria selected, cooperative banks are better rated on average. However, some differences emerge depending on the type of information analyzed (their communications or practices), hence the importance of analyzing the practice of banks to judge their CSR, something that is not done yet in the literature.
Mot(s) clé(s)
Corporate Social Responsibility (CSR); cooperative banks; European banks
2020-27

China’s debt relief actions overseas and macroeconomic implications

Gatien Bon, Gong Cheng

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Abstract
This paper explores a novel database of 140 cases of debt restructurings that China conducted between 2000 and 2019 in 65 debtor countries. It uncovers a number of salient features of the restructuring terms that China has offered and the ways in which China has interacted with other creditors and the International Monetary Fund (IMF). The majority of debt relief operations have been executed through debt forgiveness rather than debt rescheduling through maturity extension or/and interest rate reduction. Interestingly, a large number of Chinese debt relief operations took place within a two-year timeframe of debt relief agreements with Paris Club or private sector creditors and in the context of financial assistance from the IMF. Using local projections, this paper sheds light on the negative impact of China’s debt relief operations on growth and development prospects in debtor countries, especially when China provides debt rescheduling and does not treat the stock of nominal debt. Subdued domestic fixed capital investment and fiscal policy tightening seem to be the main drag on economic growth in debtor countries after a restructuring.
Mot(s) clé(s)
China, Paris Club, Sovereign debt, Restructuring, Development, Africa
2020-26

Infrastructures and the real exchange rate

Florian Morvillier

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Abstract
This paper investigates the nonlinear relationship between infrastructures and the Real Effective Exchange Rate (REER). Applying a Panel Smooth Transition Regression (PSTR) model to a sample of 31 countries over the period 1973-2014, we find strong evidence of a nonlinear impact of Electricity Generating Capacity (EGC) and telecommunications on the REER dynamics. When the network is not completed or the stock of infrastructures is low, an increase in EGC and telecommunications depreciates the REER, while the additional depreciation is lower or inexistent once the network is established. Finally, turning to power grid quality, we show that higher electric power losses are associated with a REER depreciation that is particularly marked when the former are high.
Mot(s) clé(s)
Infrastructures, Panel Smooth Transition Regression, Real Exchange Rate
2020-25

Should environment be a concern for competition policy when firms face environmental liability ?

Maxime Charreire, Eric Langlais

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Abstract
This paper considers an oligopoly where firms produce a joint and indivisible environmental harm as a by-product of their output. We first analyze the effects on the oligopoly equilibrium of alternative designs in environmental liability law, secondly, we discuss the rationale for "non-conventional" competition policies, i.e. more concerned with public interest such as the preservation of human health or environment. We study firms decisions of care and output under various liability regimes (strict liability vs negligence) associated with alternative damages apportionment rules (per capita vs market share rule), and with damages multipliers. We find that basing an environmental liability law on the combination of strict liability, the per capita rule, and an "optimal" damages multiplier, is consistent with a conservative competition policy, focused on consumers surplus, since, weakening firms' market power also increases aggregate expenditures in environment preservation and social welfare. In contrast, a shift to the market share rule, or to a negligence regime, may be consistent with a restriction of competition, since firms' entry may instead lead to a decrease in aggregate environmental expenditures and losses of social welfare. Nevertheless the fine tuning of the policy requires specific information from a Competition Authority, which we discuss as well.
Mot(s) clé(s)
Strict liability; negligence; damages apportionment rules; market share liability; environmental liability; Cournot oligopoly; competition policy.
2020-24

Academic Convergence and Migration: the effect of the BolognaProcess on European Mobility.

Rémi Odry

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Abstract
This paper investigates the effects of the Bologna Process on migration inflows within European countries between 2004 and 2017. To this aim, we rely on a large panel of bilateral flows between most of the European countries, and
use several estimators. Our results show that the Bologna Process has a limited, when significant, impact on migration in Europe. Its effect is mostly visible in destination countries but is extremely weak when we focus on the implementation in origin countries. When detected, the effect of the Bologna Process is growing following its implementation. In contrast, Diasporas are important in explaining flows between countries. We also find that traditional variables such as common language and distance may not be as relevant as before in studying intra-European flows. Finally, we notice an unexpected negative effect of the adoption of the Euro.
Mot(s) clé(s)
Bologna Process; Migration; Education; Gravity Model.
2020-23

Monetary Policy and Housing Loan Default

Barbara Castillo Rico, George Overton

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Abstract
The most direct channel of transmission of monetary policy to households is the modification of ECB lending and deposit facilities rates. Outstanding borrowers with adjustable rate loans face affordability conditions changes with important consequences on their financial situation. In this paper, we study the impact of monetary policy changes on housing credit default over the period 2004-2015. We use an extensive panel of French housing loans to reconstruct amortization tables over the life of each loan and compute changes in quarterly payments due to monetary policy action, later using hazard models to map changes in interest rates to default. Importantly, our data set allows the assumption of the absence of strategic default our analysis, which isolates involuntary default in our estimates. First, we find that a 100 bp increase in quarterly payment induced by variations in the 3-month Euribor increases the probability of default by around 5\%. Second, we identify employment stability as a major insurance factor against rising policy rates during contractionary monetary policy action. Finally, we provide evidence about the existence of a self-selection of riskier borrower profiles into adjustable rate loans. The concern regarding payment size on adjustable-rate loans is of heightened importance in a monetary policy context characterized by uncertainty over the timing of a rate increase following a sustained period of low or negative rates.
Mot(s) clé(s)
Housing loans, Monetary policy, Default
2020-22

China’s overseas Sovereign debt relief actions: What insights do recent cases provide?

Gatien Bon, Gong Cheng

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Abstract
In the context of the COVID-19 pandemic, the G20 and the Paris Club agreed to provide bilateral official debt relief to low-income countries. This paper presents eight case studies of China’s recent debt relief actions overseas to shed light on their common features and particularities. These cases – Cuba (2010), Seychelles (2011), Chad (2017), Zambia (2018), Mozambique (2018), Cameroon (2019), Congo (2019) and Venezuela (in progress) – highlight China’s growing role in providing debt relief. This relief is provided either in conjunction with other official creditors, such as the Paris Club, or private creditors, or out of its own political initiative. The magnitude of debt relief and restructuring terms vary across different cases and depending on the terms offered by other creditors. We observe a predominant share of cancellation of accumulated arrears instead of nominal haircut of the outstanding principal in these eight cases. We conclude with preliminary reflections on political economy factors motivating China’s debt relief actions.
Mot(s) clé(s)
Africa, China, Paris Club, Sovereign debt restructuring
2020-21

Création du FED : réunir la gestion de la monnaie et de la liquidité

Anne-Marie Rieu-Foucault

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Abstract
The process of creating the Federal Reserve System (FED) was the result of a series of monetary and financial dysfunctions, which resulted in a succession of liquidity crises in the second half of the 19th century in the United States. This paper presents these dysfunctions and the means found by clearing houses to manage liquidity crises in the absence of a central bank. He discusses the reasons that ultimately led to the creation of the FED, putting into perspective the political and financial dimensions of this creation. It concludes, with regard to history, on the contributions of the FED and the shortcomings which the central bank faced, when the 2008 crisis broke out.
Mot(s) clé(s)
central banks, money, liquidity, financial crises
2020-20

The Contribution of Residential Segregation to Racial Income Gaps: Evidence from South Africa

Florent Dubois, Christophe Muller

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Abstract
Persistent racial income disparities cannot only be explained by differences in socio-economic characteristics. In this paper, we contend that local segregation should be an essential component of the determination of socio-ethnic income gaps using the contemporary White/African gap in South Africa. First, we complete Mincer wage equations with an Isolation index. Second, we decompose the income gap distribution into detailed composition and structure components. Third, we explore the heterogeneity of segregation effects along three theoretical lines: racial preferences, labor market segmentation, and networks effects. Segregation is found to be the main contributor of the structure effect, ahead of education and experience, and to make a sizable contribution to the composition effect. Moreover, segregation is detrimental to incomes at the bottom of the African distribution, notably in association with local informal job-search networks, while it is beneficial at the top of the White distribution. Only minor influences of racial preferences and labor market segmentation are found. Specific subpopulations are identified that suffer and benefit most from segregation, including for the former, little educated workers in agriculture and mining, often female, immersed in their personal networks. Finally, minimum wage policies are found likely to attenuate the segregation’s noxious mechanisms.
Mot(s) clé(s)
Post-Apartheid South Africa, Distribution Decompositions, Income Distribution, Residential Segregation
2020-19

Emissions Trading with Transaction Costs

Marc Baudry, Anouk Faure, Simon Quemin

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Abstract
We develop an equilibrium model of emissions permit trading in the presence of fixed and proportional trading costs in which the permit price and firms’ participation in and extent of trading are endogenously determined. We analyze the sensitivity of the equilibrium to changes in the trading costs and firms’ allocations, and characterize situations where the trading costs alternatively depress or raise permit prices relative to frictionless market conditions. We calibrate our model to annual transaction and compliance data in Phase II of the EU ETS (2008-2012) which we consolidate at the firm level. We find that trading costs in the order of 10 k€ per annum plus 1€ per permit traded substantially reduce discrepancies between observations and theoretical predictions for firms’ behavior (e.g. autarkic compliance). Our simulations suggest that ignoring trading costs leads to an underestimation of the price impacts of supply-curbing policies, this difference varying with the incidence on firms.
Mot(s) clé(s)
Emissions trading, Transaction costs, Policy design and evaluation, EU ETS
2020-18

Robustness of the Balassa-Samuelson effect: evidence from developing and emerging economies

Florian Morvillier

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Abstract
This paper aims at investigating the robustness of the Balassa-Samuelson (BS) effect to alternative proxies for a panel of 38 developing and emerging economies over the period 1980-2016. We examine the internal and external versions of the BS hypothesis using a total of five different measures. Relying on the Cross Sectional-Distributed Lag (CS-DL) approach, we show that the internal version of the BS hypothesis holds only if the labor productivity differential between the tradable and non-tradable sectors is used rather than the Gross Domestic Product Per worker. We also find evidence of a positive and robust effect of the relative price of the non-traded to traded goods on the real exchange rate. Overall, our findings highlight that while the verification of the internal version of the BS effect depends on the proxy considered for productivity, the validity of the external version is a general and robust result.
Mot(s) clé(s)
Balassa–Samuelson effect, real exchange rate, relative prices
2020-17

The Wage-Maximisation Property

Christian Bidard

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Abstract
For linear single-product models, the competitive long-run technique is wage maximising at a given rate of profit. The property is extended to multiple-product systems that satisfy an additional hypothesis called robustness. In particular, the nonsubstitution property implies that all prices are minimum in terms of wage. The result applies to several types of models, including production with fixed capital. On the robustness hypothesis, the wage-maximisation property can be seen as the counterpart in value terms of the golden rule.
Mot(s) clé(s)
Nonsubstitution, wage maximisation, golden rule, fixed capital, Sraffa.
2020-16

Exchange rate predictive densities and currency risks: A quantile regression approach

Niango Ange Joseph Yapi

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Abstract
We investigate the ability of the Fama equation to compute proper conditional densities and currency risks. Based on quantile regressions, we fit a Skewed t-distribution to estimate the conditional densities on the monetary policy of eight currency pairs. We demonstrate that the conditional densities are highly sensitive to the monetary policy stances. Then, we use the estimated conditional densities to measure the currency risks. Our results highlight that the depreciation/appreciation risks are extremely heterogeneous and that the currencies are more exposed to depreciation risks, especially during turmoils. Our findings can be used as a supplementary tool to assess whether a currency behaves as a safe-haven currency. We also investigate the relative and absolute performance of our model in forecasting densities. We find that the predictive densities are perfectly well-calibrated. Moreover, our results also demonstrate that our methodology can outperform the random walk in forecasting densities.
Mot(s) clé(s)
Quantile regressions, Predictive densities, Currency risks, Safe-haven currency.
2020-15

Why do insurers fail? A comparison of life and non-life insolvencies using a new international database

George Overton, Olivier de Bandt

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Abstract
Plantin & Rocher (2016) document how insurers often engage in risk-shifting years before the materialization of a failure. This paper empirically examines this claim by testing the mechanisms of insurance insolvency, using a first-of-its-kind international database assembled by the authors which merges data on balance sheet and income statements together with information on impairments over the last 30 years. Employing different fixed effects logistic specifications and parametric survival models, the paper presents evidence, on top of the role of profitability as a leading indicator of failures, of the intrinsic asymmetries between the life and non-life insurance sectors. In the life sector, asset mix is highly significant in predicting an impairment, while operating efficiency plays no role. In the non-life sector, the opposite proves true.
Mot(s) clé(s)
Insurance, insolvency prediction, leading indicators, financial crises
2020-14

It Takes a Village to Raise a Child. Impact Evaluation of the Training for Volunteers in Health and the Nutritional Recovery Cycles in West Guatemala

Juliana Yael Milovich, Elena Villar

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Abstract
The highest rates of child undernutrition in Guatemala are found in Western regions, where more than half of the children under five are stunted and almost 20% underweight. However, despite the large incidence of undernutrition in the country, there is no robust evidence of its determinants, effects and possible solutions. Our study analyses the impact of a program implemented by the Foundation FUNDAP in West Guatemala, Volunteers in Health, on the nutritional health of children under five years of age. We provide new evidence on how training women at the community level to provide information on infants' nutrition to mothers, together with the monitoring of children's growth and the supply of food supplements, contributes to significantly reduce the probability of children being underweight in West Guatemala.
Mot(s) clé(s)
Child Undernutrition, Women's Training, Health Programs, Impact Evaluation
2020-13

Taming Debt: Can GDP-Linked Bonds Do the Trick?

Sarah Mouabbi, Jean-Paul Renne, Jean-Guillaume Sahuc

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Abstract
We study the debt-stabilizing properties of indexing debt to GDP using a consumption-based macro-finance model. Three results stand out: (i) GDP-linked bond prices would embed sizeable and time-varying risk premiums of about 40 basis points, (ii) for a fixed budget surplus, issuing GDP-linked bonds does not necessarily imply more beneficial debt-to-GDP ratios in the medium- to long-run, and (iii) the debt-stabilizing budget surplus is more predictable under such issuances at the expense of being higher on average. Our findings call into question the view that GDP-linked bonds tame debt.
Mot(s) clé(s)
GDP-linked bonds, debt stabilization, consumption-based model, term structure
2020-12

Qualité des études d'impact et travail parlementaire

Benjamin Monnery, Bertrand du Marais

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Abstract
Since 2009, the French Government is required to produce a regulatory impact assessment (RIA) of the bills introduced in the Parliament, in order to document ex-ante their legal, economic, social or environmental consequences. This article proposes a statistical analysis of a sample of thirty impact assessments published from june 2017 to august 2019, representing about half of the new bills over this period. First, the article documents the heterogeneous and often mediocre quality of impact assessments through a series of indicators, and attempts to identify the determinants of such quality. Second, the article investigates the use of RIA by parliamentarians under the current 15th legislature and shows that, while this use is limited and mostly driven by opposition parties, better RIA can definitely contribute to parliamentary work. Finally, the reasons for the relatively poor quality of RIA and ways for improvement are discussed.
Mot(s) clé(s)
regulatory impact assessments ; ex-ante evaluation ; Parliament ; Government
2020-11

When are Google data useful to nowcast GDP? An approach via pre-selection and shrinkage

Laurent Ferrara, Anna Simoni

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Abstract
We analyse whether, and when, a large set of Google search data can be useful to increase GDP nowcasting accuracy once we control for information contained in official variables. We put forward a new approach that combines variable pre-selection and Ridge regularization and we provide theoretical results on the asymptotic behaviour of the estimator. Empirical results on the euro area show that Google data convey useful information for pseudo-real-time nowcasting of GDP growth during the four first weeks of the quarter, when macroeconomic information is lacking. However, as soon as official data become available, their relative nowcasting power vanishes. In addition, a true real-time analysis confirms that Google data constitute a reliable alternative when official data are lacking.
Mot(s) clé(s)
Nowcasting, Big data, Google search data, Sure Independence Screening, Ridge Regularization
2020-10

Learning, house prices and macro-financial linkages

Pauline Gandré

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Abstract
In the US, the linkages between the housing market, the credit market and the real sector have been striking in the past decades. To explain these linkages, I develop a small-scale DSGE model in which agents update non-rational beliefs about future house price growth, in accord with recent survey data evidence. Conditional on subjective house price beliefs, expectations are model-consistent. In the model with non-rational expectations, both standard productivity shocks and shocks in the credit sector generate endogenously persistent booms in house prices. Long-lasting excess volatility in house prices, in turn, affects the financial sector (because housing assets serve as collateral for household and entrepreneurial debt), and propagates to the real sector. This amplification and propagation mechanism improves the ability of the model to explain empirical puzzles in the US housing market and to explain the macro-financial linkages during 1985-2019. The learning model can also replicate the predictability of forecast errors evidenced in survey data.
Mot(s) clé(s)
Housing booms, Financial Accelerator, Business Cycles, Non-rational Expectations, Learning.
2020-9

Currency misalignments and exchange rate regimes in Latin American countries: a trade-off issue

Jorge Carrera, Blaise Gnimassoun, Valérie Mignon, Romain Restout

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Abstract
This paper conducts an in-depth empirical investigation on the impact of the exchange rate regime (ERR) on real currency misalignments in a panel of 17 Latin American countries over the 1970-2016 period. We consider explicitly the two dimensions of misalignments, size and persistence, and evaluate four different ERR classifications. We also pay attention to cross-sectional dependencies across countries that appear to be important in Latin America, and provide several robustness checks. Our main findings show that, although fixed ERR perform well in limiting the size of misalignments—and in reducing inflation and fiscal deficit—the disequilibria are more persistent. On the contrary, allowing for more flexibility reduces persistence but increases the size of misalignments. Overall, we show that Latin American countries face a crucial trade-off when they have to choose their ERR.
Mot(s) clé(s)
Latin American countries; Exchange rate regimes; Currency misalignments
2020-8

International Economic Sanctions: Multipurpose Index Modelling in the Ukrainian Crisis Case

BALI Morad, Nady Rapelanoro

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Abstract
This short paper’s goal is to create a sanction index to simulate international economic sanctions. To do so, it has been decided to focus on the Ukrainian crisis case, and on international sanctions against the Russian Federation. The first part of this paper treats the methodology and mathematical formalization used to build our index. After the mathematical formalization comes an empirical part that is demonstrating improvements brought by our work. To assess these improvements, our index is compared to a previously developed index from Kholodilin and Netšunajev (2016). Four country SVAR models are used in two main sections, two initials and two extended. Results of this section reveal that our new sanction index has a stronger explanatory power. In addition, it seems that our index affects short-term Russian production variations more sharply than its predecessor. The explanatory power improvements are confirmed by extended models, confirming our index relevance.
Mot(s) clé(s)
Russian economy, European economies, Ukrainian crisis, economic sanctions, sanctions shock, trade relations, international crisis, structural vector autoregressive models
2020-7

Pratiques et doctrine des banques centrales au défi du changement climatique : rupture ou continuité ?

Laurence Scialom

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Abstract
Central banks are faced with the financial challenge of climate change: on the one hand, the need for a massive reallocation of financial flows from "brown" to "green" activities and sectors and on the other hand climate related financial risks considered as systemic. Responding to this challenge will lead to profound changes in their doctrine and practices. This article shows that history is punctuated by such rapid changes in central banking. It analyses the arguments for integrating financial climate risks into central banks' doctrine and operational framework and attempts to explore what a greening of central bank actions might mean in practice.
Mot(s) clé(s)
central banking, climate change, climate related financial risk
2020-6

Monetary Policy Transmission with Downward Interest Rate Rigidity

Grégory Levieuge, Jean-Guillaume Sahuc

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Abstract
Empirical evidence suggests that the pass-through from policy to retail bank rates is asymmetric in the euro area. Bank lending rates adjust more slowly and less completely to Eonia decreases than to increases. We investigate how this downward interest rate rigidity affects the response of the economy to monetary policy shocks. To this end, we introduce asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. We find that the initial response of GDP to a negative monetary policy shock is 25% lower than its response to a positive shock of similar amplitude. This implies that a central bank would have to decrease its policy rate by 50% to 75% more to obtain a medium-run impact on GDP that would be symmetric to the impact of the positive shock. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions.
Mot(s) clé(s)
Downward interest rate rigidity, asymmetric adjustment costs, banking sector, DSGE model, euro area.
2020-5

Are business angel-backed companies truly different? a comparative analysis of the financial structure

Nadine Levratto, Julien Salin

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Abstract
Through a new eye on corporate finance theories of small firms and of business angel financing determinants, this paper reconsiders the impact of Business Angels on financial structure of backed firms using matching method and a unique individual dataset of French companies over the 2009-2015 period. It shows that the signal effect of Business angel investment, improving access to external finance from another investor is limited. This paper contributes to the corporate finance literature by investigating on the validity of principal corporate finance theories. It also brings insight to the understanding of value added of BA on backed firms.
Mot(s) clé(s)
Keywords: Business angels, Financial Structure, Informal venture capital, Matching techniques
2020-4

Covid-19 : analyse spatiale de l’influence des facteurs socio-économiques sur la prévalence et les conséquences de l’épidémie dans les départements français

Mounir Amdaoud, Giuseppe Arcuri, Nadine Levratto

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Abstract
This paper analyses the socio-economic determinants of hospitalizations and death rates related to Covid-19 on the one hand, and the excess mortality observed this year compared to previous ones, on the other. It proposes a territorial approach to these questions thanks to the use of data calculated at the French departments level. The exploratory spatial analysis carried out reveals the heterogeneity and spatial autocorrelation of the disease and its consequences. The use of spatial econometric models, then, allows us to highlight the influence of demographic density, social inequalities, part of blue-collars in the active population and emergency services on the studied phenomena.
Mot(s) clé(s)
Covid-19, local variables, spatial analysis
2020-3

Unconventional Monetary Policies: A Stock-Taking Exercise

Christian Pfister, Jean-Guillaume Sahuc

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Abstract
This paper takes stock of the literature on unconventional monetary policies, from their implementation to their effects on the economy. In particular, we discuss in detail the two main measures implemented in most developed economies, namely forward guidance and large-scale asset purchases. Overall, there is near consensus that these measures have been useful, although there are a few dissenting views. Because unconventional monetary policies have left their mark on economies and on the balance sheets of central banks, we offer insights into their legacy and ask whether they have led to a change in “the rules of the game” for setting interest rates and choosing the size and composition of central banks’ balance sheets. Finally, we discuss whether to modify the objectives and the instruments of monetary policy in the future, in comparison with the pre-crisis situation.
Mot(s) clé(s)
Unconventional monetary policies.
2020-2

Banks to basics! Why banking regulation should focus on equity

Pierre Durand, Gaëtan Le Quang

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Abstract
Banking regulation faces multiple challenges that call for rethinking the way it is designed in order to tackle the specific risks associated with banking activities. In this paper, we argue that regulators should focus on designing strong equity requirements instead of implementing several complex rules. Such a constraint in equity is however opposed by the banking industry because of its presumed adverse impact on banks' performance. Resorting to Random Forest regressions on a large dataset of banks balance sheet variables, we show that the ratio of equity over total assets has a clear positive effect on banks' performance, as measured by the return on assets. On the contrary, the impact of this ratio on the shareholder value, as measured by the return on equity, is most of the time weakly negative. Strong equity requirements do not, therefore, impede banks' performance but do reduce the shareholder value. This may be the reason why the banking industry so fiercely opposes strong equity requirements.
Mot(s) clé(s)
Banking regulation ; Capital requirements ; Basel III ; Random Forest Regression
2020-1

Asymmetric price transmission along the food marketing chain: A focus on the recent price war.

Chouaib Jouf

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Abstract
This paper investigates the price transmission along the food marketing chain in France. We focus on this transmission at the upstream and downstream levels during the so-called "price war" waged by the retailers in the French market. To this aim, we rely on an asymmetric cointegration approach: the Nonlinear Autoregressive Distributed Lag (NARDL) model. We find that although the asymmetric price transmission is effective along the French food marketing chain, it is more pronounced at the downstream level, illustrating that agri-food companies are the main losers of the recent war price in the food sector.
Mot(s) clé(s)
Food sector, Price transmission, Asymmetry, Nonlinear ARDL model
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