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Working papers

The Working Paper Series showcases research work being conducted at the Banque de France on the development of analytical tools for use in macroeconomic forecasting, monetary policy conduct and the safeguarding of financial stability. The papers do not necessarily reflect the position of the Banque de France or the Eurosystem.

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December

Publication Working Paper Series no. 796:
This Town Ain't Big Enough? Quantifying Public Good Spillovers

Despite long-standing theoretical interest, empirical attempts at investigating the appropriate level of decentralization remain scarce. This paper develops a simple and flexible framework to test for the presence of public good spillovers between...

By Nicolas Jannin, Sotura Aurelie
  • Published on 12/30/2020
  • 61 pages
  • EN
  • PDF (4.77 MB)
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December

Publication Working Paper Series no. 795:
The international dimension of a fragile EMU

This paper quantifies the economic influence that shocks to EMU cohesion, which in turn reflect the incomplete nature of the monetary union, have on the rest of the world, by disentangling euro area stress shocks and global risk aversion shocks on the...

By Ioannou Demosthenes, Pagliari Maria Sole, Stracca Livio
  • Published on 12/30/2020
  • 57 pages
  • FR
  • PDF (4.46 MB)
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December

Publication Working Paper Series no. 794:
Sticky Deposit Rates and Allocative Effects of Monetary Policy

This paper documents that monetary policy affects credit supply through banks’ cost of funding. Using administrative credit-registry and regulatory bank data, we find that banks can incur an increase in their funding costs of at least 30 basis points...

By Duquerroy Anne, Adrien Matray, Saidi Farzad
  • Published on 12/24/2020
  • 47 pages
  • EN
  • PDF (9.84 MB)
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December

Publication Working Paper Series no. 793:
Imported or Home Grown? The 1992-3 EMS Crisis

Using newly assembled data on foreign exchange market intervention, we construct a daily index of exchange market pressure during the 1992-3 crisis in the European Monetary System. Using this index, we pinpoint when and where the crisis was most severe...

By Eichengreen Barry, Naef Alain
  • Published on 12/23/2020
  • 46 pages
  • EN
  • PDF (2.02 MB)
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December

Publication Working Paper Series no. 792:
Set-up Costs and the Financing of Young Firms

We show that set-up costs are a key determinant of the capital structure of young firms. Theoretically, when firms face high set-up costs, they can only be established by leveraging up and lengthening debt maturity. Empirically, we use a large sample...

By François Derrien, Mésonnier Jean-Stéphane, Vuillemey Guillaume
  • Published on 12/22/2020
  • 47 pages
  • EN
  • PDF (2.54 MB)
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December

Publication Working Paper Series no. 791:
Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap

The paper assesses the impact of adding information on financial cycles on the output gap estimates for eight advanced economies using two unobserved components models: a reduced form extended Hodrick-Prescott filter, and a standard semi-structural...

By Kátay Gábor, Kerdelhué Lisa, Lequien Matthieu
  • Published on 12/18/2020
  • 54 pages
  • EN
  • PDF (895.54 KB)
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December

Publication Working Paper Series no. 790:
Climate-related Risks and Central Banks’ Collateral Policy: a Methodological Experiment

Central banks increasingly acknowledge that climate change is a source of financial risks, which is likely to also impact their conduct of monetary policy. Against this backdrop, the aim of this paper is to explore one potential approach to factoring...

By Oustry Antoine, Erkan Bunyamin, Svartzman Romain, Weber Pierre-François
  • Published on 12/15/2020
  • 48 pages
  • EN
  • PDF (2.71 MB)
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December

Publication Working Paper Series no. 789:
Lower Bank Capital Requirements as a Policy Tool to Support Credit to SMEs: Evidence From a Policy Experiment?

Starting in 2014 with the implementation of the European Commission Capital Requirement Directive, banks operating in the Euro area were benefiting from a 25% reduction (the Supporting Factor or "SF" hereafter) in their own funds requirements...

By Dietsch Michel, Fraisse Henri, Lé Mathias, Lecarpentier Sandrine
  • Published on 12/14/2020
  • 45 pages
  • EN
  • PDF (845.81 KB)
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December

Publication Working Paper Series no. 788:
Nowcasting World GDP Growth with High-Frequency Data

The Covid-19 crisis has shown how high-frequency data can help tracking economic turning points in real-time. Our paper investigates whether high-frequency data can also improve the nowcasting performances for world GDP growth on quarterly or annual...

By Jardet Caroline, Meunier Baptiste
  • Published on 12/11/2020
  • 37 pages
  • EN
  • PDF (2.37 MB)
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December

Publication Working Paper Series no. 787:
House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach

We develop a model of house prices and household indebtedness and include it in the Banque de France's semi-structural macroeconomic model in order to analyse the implications of mortgage debt dynamics on economic fluctuations and financial...

By Bove Guillaume, Dees Stéphane, Thubin Camille
  • Published on 12/11/2020
  • 45 pages
  • EN
  • PDF (2.33 MB)
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December

Publication Working Paper Series no. 786:
The 100% Reserve Reform: Calamity or Opportunity?

This paper considers the various 100% Reserve plans that have appeared since the interwar period and have since then been adapted. In all formulations of those schemes, Government liabilities (cash, central bank reserves and short-term Treasuries) back...

By Pfister Christian
  • Published on 12/02/2020
  • 19 pages
  • EN
  • PDF (860.95 KB)
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November

Publication Working Paper Series no. 785:
The Impact of ICTs and Digitalization on Productivity and Labor Share: Evidence from French firms

Taking advantage of an original firm-level survey carried out by the Banque de France, we empirically investigate how the employment of ICT specialists (in-house and external) and the use of digital technologies (cloud and big data) have an impact on...

By Nevoux Sandra, Py Loriane
  • Published on 11/13/2020
  • 29 pages
  • FR
  • PDF (2.19 MB)
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October

Publication Working Paper Series no. 784:
Economic Adjustment during the Great Recession: The Role of Managerial Quality

This study investigates empirically how managerial practices have affected macroeconomic adjustment during the Great Recession after the 2008 economic crisis. We start by constructing a country*industry balanced panel data over the 2007-2015 period for...

By Lopez Jimmy, Mairesse Jacques, Nicoletti Giuseppe
  • Published on 10/23/2020
  • 20 pages
  • EN
  • PDF (2.14 MB)
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October

Publication Working Paper Series no. 783:
Growth factors in developed countries: A 1960-2019 growth accounting decomposition

Using a new and original database, our paper contributes to the growth accounting literature with three original aspects: first, it covers a long period from the early 60’s to 2019, just before the COVID-19 crisis; second, it analyses at the country...

By Devillard Aurélien, Spiezia Vincenzo
  • Published on 10/07/2020
  • 24 pages
  • EN
  • PDF (2.51 MB)
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September

Publication Working Paper Series no. 782:
Determinants of Banks’ Liquidity: a French Perspective on Interactions between Market and Regulatory Requirements

The paper investigates the impact of solvency and liquidity regulation on banks' balance sheet structure. The Covid-19 pandemics shows that periods of sharp increase in risk aversion often result in liquidity strains for banks due to the...

By De Bandt Olivier, Lecarpentier Sandrine, Pouvelle Cyril
  • Published on 09/16/2020
  • 44 pages
  • FR
  • PDF (2.19 MB)
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September

Publication Working Paper Series no. 781:
Risk Sharing in Europe: New Empirical Evidence on the Capital Markets Channel

This paper assesses the effectiveness of risk sharing mechanisms in Europe by breaking down the factor income components into their sub-components, and aims to further examine whether financial integration and international portfolio diversification...

By Dufrénot Gilles, Gossé Jean-Baptiste, Clerc Caroline
  • Published on 09/10/2020
  • 29 pages
  • EN
  • PDF (2.46 MB)
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September

Publication Working Paper Series no. 780:
No Firm Is an Island? How Industry Conditions Shape Firms’ Expectations

We study how firms’ expectations and actions are affected by both aggregate and industry-specific conditions using a survey of French manufacturing firms. We document an important new stylized fact. In response to industry-level shocks that have no...

By Andrade Philippe, Coibion Olivier, Gautier Erwan, Gorodnichenko Yuriy
  • Published on 09/09/2020
  • 51 pages
  • EN
  • PDF (2.59 MB)
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September

Publication Working Paper Series no. 779:
Fed Communication on Financial Stability Concerns and Monetary Policy Decisions: Revelations from Speeches

This paper studies the informational content of publicly given speeches of FOMC members with a focus on financial stability, from 1997 to 2018. We document that presidents of Federal Reserve Banks spoke more than Board members around and after the...

By Istrefi Klodiana, Odendahl Florens, Sestieri Giulia
  • Published on 09/07/2020
  • 46 pages
  • EN
  • PDF (1.57 MB)
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September

Publication Working Paper Series no. 778:
Disastrous Defaults

We define a disastrous default as the default of a systemic entity. Such an event is expected to have a negative effect on the economy and to be contagious. Bringing macroeconomic structure to a no-arbitrage asset-pricing framework, we exploit prices...

By Gouriéroux Christian, Monfort Alain, Mouabbi Sarah, Renne Jean-Paul
  • Published on 09/04/2020
  • 65 pages
  • EN
  • PDF (2.23 MB)
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July

Publication Working Paper Series no. 777:
The Financing of Investment: Firm Size, Asset Tangibility and the Size of Investment

How do firms finance their investment? To what extent does the financing mix depends on the nature or the size of investment? To what extent does the funding mix of investment vary along firm size? Relying on a unique database of firms covering 72% of...

By Lé Mathias, Vinas Frédéric
  • Published on 07/29/2020
  • 67 pages
  • EN
  • PDF (2.16 MB)
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July

Publication Working Paper Series no. 776:
Accounting for Intergenerational Wealth Mobility in France over the 20th Century: Method and Estimations

We propose a new and simple method to study intergenerational wealth correlation between two generations, which is easy to implement in wealth (and housing) surveys and aims at overcoming the strong data limitation faced in most of the countries. We...

By Garbinti Bertrand, Savignac Frédérique
  • Published on 07/21/2020
  • 90 pages
  • EN
  • PDF (4.91 MB)
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July

Publication Working Paper Series no. 775:
Overview and Inventory of French Funds' Liquidity Management Tools

This article constitutes a first presentation of the prospectus analysis tool developed through a cooperation between the Banque de France and the Autorité des marchés financiers (AMF). This work aims to identify the liquidity management tools (LMT)...

By Darpeix Pierre-Emmanuel, Le Moign Caroline, Même Nicolas, Novakovic Marko
  • Published on 07/17/2020
  • 37 pages
  • EN
  • PDF (3.31 MB)
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July

Publication Working Paper Series no. 774:
Climate-Related Scenarios for Financial Stability Assessment: An Application to France

This paper proposes an analytical framework to quantify the impacts of climate policy and transition narratives on economic and financial variables necessary for financial risk assessment. Focusing on transition risks, the scenarios considered include...

By Allen Thomas, Dees Stéphane, Boissinot Jean, Caicedo Graciano Carlos Mateo, Chouard Valérie, Clerc Laurent, De Gaye Annabelle, Devulder Antoine, Diot Sébastien, Lisack Noëmie, Pegoraro Fulvio, Rabaté Marie, Svartzman Romain, Vernet Lucas
  • Published on 07/16/2020
  • 68 pages
  • EN
  • PDF (5.2 MB)
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July

Publication Working Paper Series no. 773:
Share Buybacks, Monetary Policy and the Cost of Debt

Share buybacks have become common practice across U.S corporations. This paper shows that firms finance these operations mostly through newly issued corporate bonds, and that the exogenous variation in the cost of debt -due to innovations in monetary...

By Elgouacem Assia, Zago Riccardo
  • Published on 07/02/2020
  • 47 pages
  • EN
  • PDF (2.62 MB)
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July

Publication Working Paper Series no. 772:
How Do Markets React to Tighter Bank Capital Requirements?

We use hikes in the countercyclical capital buffer [CCyB] to measure how tighter bank capital requirements affect their solvency and value, according to market participants. Two features of the CCyB in Europe allow for a unique identification strategy...

By Couaillier Cyril, Henricot Dorian
  • Published on 07/01/2020
  • 30 pages
  • EN
  • PDF (6 MB)
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June

Publication Working Paper Series no. 771:
Heterogeneity in Bank Leverage: the Funding Channels of Complexity

This paper assesses the net impact of complexity on leverage, at the Bank Holding Companies (BHCs) level using unique French supervisory data from 2010 to 2017. Geographical and structural complexity introduce diversification benefits and agency...

By Bussière Matthieu, Meunier Baptiste, Pedrono Justine
  • Published on 06/29/2020
  • 36 pages
  • EN
  • PDF (2.25 MB)
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June

Publication Working Paper Series no. 770:
What Matters in Households’ Inflation Expectations?

We provide evidence that households discretize their inflation expectations so that what matters for durable consumption decisions is the broad inflation regime they expect. Using survey data, we document that a large share of the adjustment in the...

By Andrade Philippe, Gautier Erwan, Mengus Eric
  • Published on 06/25/2020
  • 102 pages
  • EN
  • PDF (3.34 MB)
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June

Publication Working Paper Series no. 769:
Why Fiscal Regimes Matter for Fiscal Sustainability

This paper introduces a Regime-Switching Model-Based Sustainability test allowing for periodic (or local) violations of Bohn (1998, QJE)’s sustainability condition. We assume a Markov-switching fiscal policy rule whose parameters stochastically switch...

By Aldama Pierre, Creel Jérôme
  • Published on 06/22/2020
  • 39 pages
  • EN
  • PDF (2.09 MB)
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June

Publication Working Paper Series no. 768:
Assessing the Role of Institutions in Limiting the Environmental Externalities of Economic Growth

Emissions of pollutants tend to be procyclical as they generally increase with economic growth. However, as government policy has a role to play in the mitigation of the environmental consequences of economic activity, the quality of institutions may...

By Dees Stéphane
  • Published on 06/19/2020
  • 27 pages
  • EN
  • PDF (1.94 MB)
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May

Publication Working Paper Series no. 767:
Bank Equity Value and Loan Supply

We study how bank equity values affect loan supply. We exploit granular balance sheet information on euro area banks matched with financial market data. We address endogeneity concerns by instrumenting bank stock prices with a shifter derived from each...

By Girotti Mattia, Horny Guillaume
  • Published on 05/12/2020
  • 36 pages
  • EN
  • PDF (2.9 MB)
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April

Publication Working Paper Series no. 766:
Cross-border Investments and Uncertainty: Firm-level Evidence

This paper studies the impact of uncertainty on cross-border investments. We build a data-set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of...

By Cezar Rafaël, Gigout Timothée, Tripier Fabien
  • Published on 04/29/2020
  • 51 pages
  • EN
  • PDF (2.56 MB)
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April

Publication Working Paper Series no. 765:
Public Opinion on Central Banks when Economic Policy is Uncertain

This paper investigates whether uncertainty about economic policy plays a role in shaping the credibility and reputation of the central bank in the eyes of the public. In particular, we look at the effect of policy uncertainty for the dynamics of...

By Istrefi Klodiana, Piloiu Anamaria
  • Published on 04/22/2020
  • 30 pages
  • EN
  • PDF (2.15 MB)
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April

Publication Working Paper Series no. 764:
Fiscal Consolidations and Informality in Latin America and the Caribbean

The transmission mechanisms of fiscal policy are significantly affected by informality in the labour market. Extending a narrative database of fiscal consolidations in 14 countries from Latin America and the Caribbean between 1989 and 2016 in order to...

By Lemaire Thibault
  • Published on 04/21/2020
  • 62 pages
  • EN
  • PDF (2.14 MB)
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April

Publication Working Paper Series no. 763:
How does Financial Vulnerability amplify Housing and Credit Shocks?

In this paper we study how households’ financial vulnerability affects the propagation of housing and credit shocks. First, we estimate a non-linear model generating impulse responses that depend on the evolution of households' Debt to Service...

By Couaillier Cyril, Scalone Valerio
  • Published on 04/20/2020
  • 34 pages
  • EN
  • PDF (2.21 MB)
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April

Publication Working Paper Series no. 762:
Does the Liquidity Trap Exist?

The liquidity trap is synonymous with ineffective monetary policy. The common wisdom is that, as the short-term interest rate nears its effective lower bound, monetary policy cannot do much to stimulate the economy. However, central banks have resorted...

By Lhuissier Stéphane, Mojon Benoït, Rubio-Ramirez Juan
  • Published on 04/16/2020
  • 40 pages
  • EN
  • PDF (2.66 MB)
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April

Publication Working Paper Series no. 761:
Unconventional Monetary Policies: A Stock-Taking Exercise

This paper takes stock of the literature on the 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...

By Pfister Christian, Sahuc Jean-Guillaume
  • Published on 04/08/2020
  • 36 pages
  • EN
  • PDF (2.46 MB)
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April

Publication Working Paper Series no. 760:
Carbon Tax in a Production Network: Propagation and Sectoral Incidence

We analyse the propagation of carbon taxation through input-output production networks. To do so, we use a static multi-sector general equilibrium model including France, the rest of the European Union and the rest of the world to simulate the impact...

By Devulder Antoine, Lisack Noëmie
  • Published on 04/08/2020
  • 50 pages
  • EN
  • PDF (2.7 MB)
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April

Publication Working Paper Series no. 759:
Long-term growth impact of climate change and policies: the Advanced Climate Change Long-term (ACCL) scenario building model

This paper provides a tool to build climate change scenarios to forecast Gross Domestic Product (GDP), modelling both GDP damage due to climate change and the GDP impact of mitigating measures. It adopts a supply-side, long-term view, with 2060 and...

By Alestra Claire, Chouard Valérie, Lecat Rémy
  • Published on 04/03/2020
  • 34 pages
  • EN
  • PDF (1.67 MB)
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March

Publication Working Paper Series no. 758:
A Pitfall of Cautiousness in Monetary Policy

Central banks are often reluctant to take immediate or forceful actions in the face of new information on the economic outlook. To rationalize this cautious approach, Brainard’s attenuation principle is often invoked: when a policy-maker is unsure of...

By Dupraz Stéphane, Guilloux-Nefussi Sophie, Penalver Adrian
  • Published on 03/25/2020
  • 40 pages
  • EN
  • PDF (2.08 MB)
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March

Publication Working Paper Series no. 757:
Stablecoins: A Brave New World?

At the root of the notion of stablecoin (SC) lies a desire to reconcile two different worlds: that of legal currency, whose essential attributes are hierarchical order, the vocation to uniqueness and stability of the purchasing power, and that of...

By Melachrinos Anastasia, Pfister Christian
  • Published on 03/06/2020
  • 22 pages
  • EN
  • PDF (2.03 MB)
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February

Publication Working Paper Series no. 756:
Job-to-Job Flows and Wage Dynamics in France and Italy

Some recent literature about the U.S. shows that wage dynamics are more influenced by job-to-job flows than by flows into or out of employment. In this paper, we evaluate whether this result holds also for France and Italy, characterized by a different...

By Berson Clémence, De Philippis Marta, Viviano Eliana
  • Published on 02/25/2020
  • 38 pages
  • EN
  • PDF (2.5 MB)
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February

Publication Working Paper Series no. 755:
Job Polarization, Skill Mismatch and the Great Recession

This paper shows that job polarization has a persistent negative effect on employment opportunities, labor mobility and skill-to-job match quality for mid/low-skilled workers, in particular during downturns. I introduce a model generating an endogenous...

By Zago Riccardo
  • Published on 02/17/2020
  • 69 pages
  • EN
  • PDF (7.75 MB)
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February

Publication Working Paper Series no. 754:
Market Making and Proprietary Trading in the US Corporate Bond Market

I study broker-dealers' trading activity in the US corporate bond market. I find evidence of broker-dealer market making when customers both buy and sell a bond in a day, which happens half of the time: as predicted by market making theories with...

By Dastarac Hugues
  • Published on 02/07/2020
  • EN
  • PDF (3.15 MB)
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January

Publication Working Paper Series no. 753:
Le Pont de Londres: interactions between monetary and prudential policies in cross-border lending

We examine how euro area (EA) monetary policy and recipient-country prudential policy interact to influence cross-border lending of French banks. We find that monetary spillovers via cross-border lending can be partially offset by prudential measures...

By Bussière Matthieu, Hills Robert, Lloyd Simon, Meunier Baptiste, Pedrono Justine, Reinhardt Dennis, Sowerbutts Rhiannon
  • Published on 01/29/2020
  • 40 pages
  • EN
  • PDF (2.58 MB)
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January

Publication Working Paper Series no. 752:
Questioning the puzzle: Fiscal policy, exchange rate and inflation

The paper re-investigates the effects of government spending shocks on the real exchange rate and inflation. In contrast with some previous puzzling results, we find that an increase in government spending appreciates the real exchange rate and is...

By Ferrara Laurent, Metelli Luca, Natoli Filippo, Siena Daniele
  • Published on 01/24/2020
  • 21 pages
  • EN
  • PDF (2.38 MB)
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January

Publication Working Paper Series no. 751:
Wealth effect on consumption during the sovereign debt crisis: Households heterogeneity in the Euro area

This paper studies the heterogeneity of the marginal propensity to consume out of wealth (MPC) both across and within countries. We estimate the MPC based on a cross-country harmonized household level dataset which combines surveys on wealth, income...

By Garbinti Bertrand, Lamarche Pierre, Lecanu Charlélie, Savignac Frédérique
  • Published on 01/23/2020
  • 71 pages
  • EN
  • PDF (3.1 MB)
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January

Publication Working Paper Series no. 750:
Basic Model Elasticities of the Macroeconomic Model for France of the Banque de France (FR-BDF)

This paper presents a set of Basic Model Elasticities (BMEs) of the Banque de France's new macroeconomic model for France, FR-BDF. A detailed description of the model is provided in Lemoine et al (2019) and this "BMEs workbook" is...

By Aldama Pierre, Ouvrard Jean-François
  • Published on 01/21/2020
  • 46 pages
  • EN
  • PDF (2.83 MB)
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January

Publication Working Paper Series no. 749:
Trade, Productivity and (Mis)allocation

We examine the gains from globalization in the presence of firm heterogeneity and potential resource misallocation. We show theoretically that without distortions, bilateral and export liberalizations increase aggregate welfare and productivity, while...

By Berthou Antoine, Chung John Jong Hyun, Manova Kalina, Sandoz-dit-Bragard Charlotte
  • Published on 01/17/2020
  • 60 pages
  • EN
  • PDF (2.7 MB)
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January

Publication Working Paper Series no. 748:
A Plucking Model of Business Cycles

In standard models, economic activity fluctuates symmetrically around a ``natural rate'' and stabilization policies can dampen these fluctuations but do not affect the average level of activity. An alternative view–labeled the ``plucking...

By Dupraz Stéphane, Nakamura Emi, Steinsson Jón
  • Published on 01/16/2020
  • 61 pages
  • EN
  • PDF (3.28 MB)
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January

Publication Working Paper Series no. 747:
Public Liquidity Demand and Central Bank Independence

This paper studies how private demand for public liquidity affects the independence of a central bank vis-à-vis the fiscal authority. Whereas supplying liquidity to the private sector creates degrees of freedom for fiscal and monetary authorities vis-à...

By Barthélemy Jean, Mengus Eric, Plantin Guillaume
  • Published on 01/13/2020
  • 46 pages
  • EN
  • PDF (2.02 MB)
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January

Publication Working Paper Series no. 746:
Everyday Regular Prices

Using a novel dataset from a large supermarket retailer in a European country that never engages in temporary sales, we establish that prices are actually as sticky as regular prices. Circumventing the debate on whether sales have to be included or...

By Berardi Nicoletta, Ravenna Federico, Samano Mario
  • Published on 01/09/2020
  • 28 pages
  • EN
  • PDF (951.11 KB)
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