Co-auteur
  • BLOT Christophe (65)
  • CREEL Jérôme (54)
  • LABONDANCE Fabien (38)
  • TIMBEAU Xavier (10)
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Type de Document
  • Article (57)
  • Working paper (27)
  • Rapport (13)
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Establishing the external validity of experimental inflation forecasts is essential if laboratory experiments are to be used as decision-making tools for monetary policy. Our contribution is to document whether different measures of inflation expectations, based on various categories of agents (participants in experiments, households, industry forecasters, professional forecasters, financial market participants and central bankers), share common patterns. We do so by analyzing the forecasting performance of these different categories of data, their deviations from full information rational expectations, and the variables that enter the determination of these expectations. Overall, the different categories of forecasts exhibit common features: forecast errors are comparably large and autocorrelated, and forecast errors and forecast revisions are predictable from past information, suggesting the presence of some form of bounded rationality or information imperfections. Finally, lagged inflation positively affects the determination of inflation expectations. While experimental forecasts are relatively comparable to survey and financial market data, more heterogeneity is observed compared to central bank forecasts.

in Revue de l'OFCE Publié en 2019-12
ALOUINI Olfa
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What are the relationships between country size, economic growth and business cycle volatility? To investigate this question, we developed an originalcountry-size index with principal component analysis. Traditional analysis usually equates country size with population. Our methodology enables to simultaneously consider several factors constitutive of country size: population,GDP and arable land. These additional variables allow us to capture different components of the country size and to control for more than a demographic effect. Using a panel data set of 163 countries for 1960–2007, we find, contrary to Rose (2006), that country size has a significant and negative correlation with economic performance. Our results for output volatility extend the negative and significant relationship found by Furceri and Karras (2007). In addition, we present differentiated results for small and large countries, OECD members, eurozone countries and the so-called BRIC countries.

in OFCE Policy Brief Publié en 2019-12
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This Policy brief analyses the recent expansionary decisions of the ECB in September 2019, which are now under scrutiny and have even been criticized. ■ Recent facts confirm the need of an expansionary monetary policy, as inflation expectations are still decreasing and credit remains weak. ■ We pay a special attention to the three types of risk evoked in the public debate. ■ First, it has been argued that low interest rates could increase the households saving rate due to an income effect. We show that this does not materialize on recent data. We observe such a correlation only for Germany, and this already before 2008, casting some doubt on the direction of the causality. ■ Second, it is argued that the banks' profits are at risk because of low interest rates. We show that banks' profits are steady and are recovering since 2012, and that the new measures are not expected to have a negative effect on bank's profits. ■ Third, using a macro-finance assessment of financial imbalances, we do not observe the emerging of bubbles on housing and stock market. ■ Although the downside should be carefully analysed, we conclude that the critics of the recent expansionary monetary policy does not rely on sound evidence. ■ Finally, and in any case, a fiscal expansion would reduce the need for expansionary policies. A discussion of the euro area fiscal stance is needed.

in International Journal of Finance and Economics Publié en 2019-12
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Although the literature has provided evidence of the predictive power of credit for financial and banking crises, this article aims to investigate the grounds of this link by assessing the interrelationships between credit and banking fragility. The main identification assumption represents credit and banking fragility as a system of simultaneous joint data generating processes whose error terms are correlated. We test the null hypotheses that credit positively affects banking fragility—a vulnerability effect—and that banking fragility has a negative effect on credit—a trauma effect. We use seemingly unrelated regressions and 3SLS on a panel of European Union (EU) countries from 1998 to 2012 and control for the financial and macroeconomic environment. We find a positive effect of credit on banking fragility in the EU as a whole, in the Eurozone, in the core of the EU but not at its periphery, and a negative effect of banking fragility on credit in all samples.

Time is ripe for a review of the ECB strategy: the economic context and the audience for communication have changed, and the tools for policy decisions and for analysing the environment have expanded. The definition of the inflation target, the twopillar strategy and the use of “non-standard” policy measures need discussion. A change in the ECB mandate is also worth discussing for it would permit to evaluate the current strategy and mandate against an alternative. This document was provided by Policy Department A at the request of the Committee on Economic and Monetary Affairs.

Publié en 2019-10 Collection Working paper de l'OFCE : 16
FILARDO Andrew
RUNGCHAROENKITKUL Phurichai
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This paper examines whether monetary policy reaction function matters for financial stability. We measure how responsive the Federal Reserve’s policy appears to be to imbalances in the equity, housing and credit markets. We find that changes in these policy sensitivities predict the later development of financial imbalances. When monetary policy appears to respond more countercyclically to market overheating, imbalances tend to decline over time. This effect is distinct from that of current and anticipated interest rate levels – the risk-taking channel. The evidence highlights the importance of a “policy reaction function” channel of monetary policy in shaping the financial cycle.

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With the economic slowdown in the euro area, questions arise as to whether the ECB retains some economic and political margins for manoeuvre after a decade of active policies. In this note, we highlight three possible monetary policy developments. We discuss their pros and cons according to four dimensions: political constraints, technical constraints, independence and interactions with fiscal policy.

We investigate the role of both ECB’s asset purchases and financial stress during the Eurozone sovereign debt crisis. We explain the evolution of long-term interest rates for the euro area as a whole and for some Member States since the ECB started to purchase securities for monetary policy purposes. We address the potential endogeneity between unconventional monetary policies and financial stress, and control for four categories of fundamentals: macroeconomic, international, financial and expectations. We find that expansionary unconventional monetary shocks have reduced the level of sovereign yields, whereas exogenous shocks to financial stress have had no effect. This result is robust to an ARCH representation, to a longer sample and to a panel estimation. In addition, we show that country-specific financial stress has had a positive impact on the change in sovereign yields, while unconventional monetary shocks have had a negative effect. Our results suggest that ECB’s unconventional policies have been effective in mitigating sovereign risks across the different Eurozone countries.

Publié en 2019-02 Collection Working Paper de l'OFCE : 2019-04
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When the central bank and private agents do not share the same information, private agents may not be able to appreciate whether monetary policy responds to changes in the macroeconomic outlook or to changes in policy preferences. In this context, this paper investigates whether the publication of the central bank macroeconomic information set modifies private agents’ interpretation of policy decisions. We find that the sign and magnitude of the effects of monetary policy depend on the publication of policymakers’ macroeconomic views. Contractionary monetary policy has negative effects on inflation expectations and stock prices only if associated with inflationary news

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Establishing the external validity of laboratory experiments in terms of inflation forecasts is crucial for policy initiatives to be valid outside the laboratory. Our contribution is to document whether different measures of inflation expectations based on various categories of agents (participants to experiments, households, industry forecasters, professional forecasters, financial market participants and central bankers) share common patterns by analyzing: the forecasting performances of these different categories of data; the information rigidities to which they are subject; the determination of expectations. Overall, the different categories of forecasts exhibit common features: forecast errors are comparably large and autocorrelated, forecast errors and forecast revisions are predictable from past information, which suggests the presence of information frictions. Finally, the standard lagged inflation determinant of inflation expectations is robust to the data sets. There is nevertheless some heterogeneity among the six different sets. If experimental forecasts are relatively comparable to survey and financial market data, central bank forecasts seem to be superior.

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