Publications: Working papers

Publications: Working papers 2018

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2018-1 "Réduction du ratio de dette publique : quels instruments pour quels effets ?"

Benjamin Egron

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Abstract
In the wake of the economic crisis in 2007-2008, european sovereign debt showed a large increase.
As a consequence, the possibility of starting a stabilization or a reduction of public debt ratio has
become a critical issue for the coming years to restore fiscal sustainability and to ensure compliance
with the european treaties. Against this background, the identification of the most appropriate
policies to reduce public debt ratio represents a major economic issue, especially in times of low
economic growth. The purpose of this article is to assess the ability of different fiscal policies instruments
to reduce public debt ratio. From a methodological point of view, we estimate, based on
French data, a non-linear model (Threshold VAR) including the main determinants of public debt
ratio : public spending, tax revenues, GDP and price index. The threshold VAR model allows us
to distinguish economic expansion from economic recession and therefore to take into account the
variability of the multipliers over time. We couple the TVAR model with the public debt accounting
equation in order to "transfer" the effect of a shock from a endogeneous variable to public debt
ratio. We then show that a cut in public spending can result in an increase in the public debt
ratio in the short term, moreover this effect is significantly higher in recession times. Inversely, an
increase in tax revenues lead to a decrease in the public debt ratio, in the short term, whatever the
considered regime.
Classification-JEL
H63, H68, E61, E62
Mot(s) clé(s)
Public debt, fiscal consolidation, multipliers, fiscal policy.
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2018-2 "Global Financial interconnectedness: A non-linear assessment of the uncertainty channel"

Bertrand Candelon, Laurent Ferrara, Marc Joëts

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Abstract
The role of uncertainty in the global economy is now widely recognized by policy-makers but its effects on the international fi…nancial system are less understood. In this paper we assess the impact of uncertainty on the interconnectedness within the international system of equity prices. In this respect, we extend the measure of connectedness put forward by Diebold and Yilmaz (2009) by allowing for non-linear effects through the estimation of a non-linear Threshold VAR model whose regimes depend on the level on uncertainty. Results clearly show that high uncertainty tends to generate more connectedness among equity indexes of a set of advanced and emerging countries. From an economic policy point of view, this result suggests that in the presence of high uncertainty, an adverse …financial shock in a speci…fic country is likely to propagate more widely and more strongly to the whole fi…nancial system. This result advocates for a close real-time monitoring of uncertainty measures.
Classification-JEL
G15; C31; D84
Mot(s) clé(s)
Financial markets, Network interconnectedness, Uncertainty, Non-linear model
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2018-3 "Upward Price Pressure in Two-Sided Markets: Incorporating Feedback Effects"

Andreea Cosnita-Langlais, Bjørn Olav Johansen, Lars Sorgard

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Abstract
In two-sided markets it is important to consider feedback effects following a merger, i.e. how a price change on one side of the market affects the price change on the other side of the market. Affeldt et al. (2013) introduced the Upward Pricing Pressure (UPP) for two-sided markets, and we extend their approach to take into account such feedback effects. We then discuss the implications of our results for the assessment of two-sided mergers.
Classification-JEL
L13, L40, L82
Mot(s) clé(s)
merger assessment, two-sided markets, Upward Pricing Pressure
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