L. Baudry, Hervé le Bihan, P. Sevestre, S. Tarrieu
Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.
{"title":"Price Rigidity: Evidence from the French CPI Macro-Data","authors":"L. Baudry, Hervé le Bihan, P. Sevestre, S. Tarrieu","doi":"10.2139/ssrn.1727273","DOIUrl":"https://doi.org/10.2139/ssrn.1727273","url":null,"abstract":"Based upon a large fraction of the price records used for computing the French CPI, we document consumer price rigidity in France. We first provide a methodological discussion of issues involved in estimating average price duration with micro-data. The average duration of prices in the sectors covered by the database (65% of CPI) is then found to be around 8 months. A strong heterogeneity across sectors both in the average duration of prices and in the pattern of price setting is reported. There is no clear evidence of downward nominal rigidity, since price cuts are almost as frequent as price rises. Moreover, the average size of a change in price is quite large in both cases. Overall, while our results do not entail a clear conclusion about the existence of menu costs, there is evidence of both time-dependent and state-dependent price setting behaviors by retailers.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2004-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116679400","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In order to provide medium run forecasts of headline and core HICP inflation for the euro area, we assess the usefulness of dynamic factor models. We use Stock and Watson's (1999) out-of-sample methodology for models estimated over the 1988:1-2002:3 period, with balanced and unbalanced panels. We provide evidence that factors alone or combined with indicators help improve upon the simple Autoregressive (AR) model for forecasting HICP core inflation as well total inflation, if one refers to the usual criterion of "Relative MSE" together with its standard deviation. However, regarding total HICP we do not produce forecasts that are totally satisfactory in the sense of being capable of recognizing the 1999-2000 upturn in inflation in a timely manner. But, from that point of view, the construction of a ''synthetic core'' indicator helps achieve significantly better forecasts over a 12-month horizon than the AR model for total inflation for the final part of the sample. We also show that the results are rather robust to potential data-snooping.
{"title":"Forecasting Inflation in the Euro Area","authors":"C. Bruneau, O. de Bandt, A. Flageollet","doi":"10.2139/ssrn.1728697","DOIUrl":"https://doi.org/10.2139/ssrn.1728697","url":null,"abstract":"In order to provide medium run forecasts of headline and core HICP inflation for the euro area, we assess the usefulness of dynamic factor models. We use Stock and Watson's (1999) out-of-sample methodology for models estimated over the 1988:1-2002:3 period, with balanced and unbalanced panels. We provide evidence that factors alone or combined with indicators help improve upon the simple Autoregressive (AR) model for forecasting HICP core inflation as well total inflation, if one refers to the usual criterion of \"Relative MSE\" together with its standard deviation. However, regarding total HICP we do not produce forecasts that are totally satisfactory in the sense of being capable of recognizing the 1999-2000 upturn in inflation in a timely manner. But, from that point of view, the construction of a ''synthetic core'' indicator helps achieve significantly better forecasts over a 12-month horizon than the AR model for total inflation for the final part of the sample. We also show that the results are rather robust to potential data-snooping.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"83 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2003-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126291999","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The aim of this paper is to check the possible existence of a bank lending channel in France. For that purpose, we have estimated a dynamic reduced form model allowing for asymmetries in loan supply across banks, depending on their size, liquidity and capitalization. We have used a panel of 312 French banks observed quarterly over the period 1993-2000. We find some asymmetry between liquid and illiquid banks, the latter being more sensitive to a monetary policy tightening. This result is in accordance with that obtained for several other countries of the Euro area. It constitutes an indication that, as far as they can, French banks sell part of their liquid assets in order to shield their loan portfolio from the effects of increases in the interest rate. Contrary to what has been found for the US (e.g., see Kashyap and Stein (1995, 2000) and Kishan and Opiela (2000)), we do not find the two other banks' characteristics we consider (size and capitalization) to have any significant impact on bank lending.
{"title":"Is There a Bank Lending Channel in France? Evidence from Bank Panel Data","authors":"C. Loupias, Frédérique Savignac, P. Sevestre","doi":"10.2139/ssrn.1728744","DOIUrl":"https://doi.org/10.2139/ssrn.1728744","url":null,"abstract":"The aim of this paper is to check the possible existence of a bank lending channel in France. For that purpose, we have estimated a dynamic reduced form model allowing for asymmetries in loan supply across banks, depending on their size, liquidity and capitalization. We have used a panel of 312 French banks observed quarterly over the period 1993-2000. We find some asymmetry between liquid and illiquid banks, the latter being more sensitive to a monetary policy tightening. This result is in accordance with that obtained for several other countries of the Euro area. It constitutes an indication that, as far as they can, French banks sell part of their liquid assets in order to shield their loan portfolio from the effects of increases in the interest rate. Contrary to what has been found for the US (e.g., see Kashyap and Stein (1995, 2000) and Kishan and Opiela (2000)), we do not find the two other banks' characteristics we consider (size and capitalization) to have any significant impact on bank lending.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130938128","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we evaluate the information content of the yield curve as regards future interest rates and inflation in France and Germany. An original data set of long-term zero-coupon interest rates for French and German government bonds was constructed for the period 1980-97. Empirical evidence shows that the German yield curve has a significant information content about the future average change in short-term rates and the future path of inflation. The information content of the French yield curve is much more limited and is only relevant for the average change in short-term rates. We show that the difference between the results obtained for both countries mainly stems from lower variability in German risk premia than in French risk premia.
{"title":"The Information Content of the French and German Government Bond Yield Curves: Why Such Differences?","authors":"E. Jondeau, R. Ricart","doi":"10.2139/SSRN.1734354","DOIUrl":"https://doi.org/10.2139/SSRN.1734354","url":null,"abstract":"In this paper, we evaluate the information content of the yield curve as regards future interest rates and inflation in France and Germany. An original data set of long-term zero-coupon interest rates for French and German government bonds was constructed for the period 1980-97. Empirical evidence shows that the German yield curve has a significant information content about the future average change in short-term rates and the future path of inflation. The information content of the French yield curve is much more limited and is only relevant for the average change in short-term rates. We show that the difference between the results obtained for both countries mainly stems from lower variability in German risk premia than in French risk premia.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114595992","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In order to analyse the interest rate transmission mechanism, we study daily Euro-rates term structure for the US, Germany, and the UK between 1983 and 1997. We estimate multivariate VECM-GARCH models, which take into account moste of the usual features of financial data (non-stationarity, cointegration, heteroskedasticity, asymmetric effects) The estimates of these models, allows us to study interest rate transmission as well as volatility transmission along the yield curve. Due to the huge number of the parameters it is quite difficult to interpret the empirical result. To avoid this problem we use the impulse responses framework to examine the transmission mechanism along both the yield and volatility curves.
{"title":"Interest Rate Transmission and Volatility Transmission along the Yield Curve","authors":"S. Avouyi-Dovi, E. Jondeau","doi":"10.2139/SSRN.1734648","DOIUrl":"https://doi.org/10.2139/SSRN.1734648","url":null,"abstract":"In order to analyse the interest rate transmission mechanism, we study daily Euro-rates term structure for the US, Germany, and the UK between 1983 and 1997. We estimate multivariate VECM-GARCH models, which take into account moste of the usual features of financial data (non-stationarity, cointegration, heteroskedasticity, asymmetric effects) The estimates of these models, allows us to study interest rate transmission as well as volatility transmission along the yield curve. Due to the huge number of the parameters it is quite difficult to interpret the empirical result. To avoid this problem we use the impulse responses framework to examine the transmission mechanism along both the yield and volatility curves.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"24 2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130994861","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The aim of this paper is to compare various methods which extract a Risk Neutral Density (RND) out of PIBOR as well as of Notional interest rate futures options and to investigate how traders reacted to a political event. We first focus on 5 dates surrounding the 1997 snap election and several methods: Black (1976), a mixture of lognormals (as in Melick and Thomas, 1997), an Hermite expansion (as in Abken, Madan, and Ramamurtie, 1996), and a method based on Maximum Entropy (following Kelly and Buchen, 1996). By and large the various methods give similar RNDs. Yet, the Hermite expansion approach, by allowing for somewhat dirty options prices, by providing a good fit to options prices, and by being very fast is the retained method for the data at hand. We then consider a daily panel of options running from February 1997 to July 1997. After constructing standardized options, i.e. with a fixed time to maturity, we find that operators in both markets anticipated the snap election a few days before the official announcement and that a substantial amount of political uncertainty subsisted even a month after the elections. The greater liquidity of PIBOR options eases information extraction.
{"title":"Reading Interest Rate and Bond Futures Options' Smiles: How PIBOR and Notional Operators Appreciated the 1997 French Snap Election","authors":"S. Coutant, E. Jondeau, M. Rockinger","doi":"10.2139/ssrn.1734663","DOIUrl":"https://doi.org/10.2139/ssrn.1734663","url":null,"abstract":"The aim of this paper is to compare various methods which extract a Risk Neutral Density (RND) out of PIBOR as well as of Notional interest rate futures options and to investigate how traders reacted to a political event. We first focus on 5 dates surrounding the 1997 snap election and several methods: Black (1976), a mixture of lognormals (as in Melick and Thomas, 1997), an Hermite expansion (as in Abken, Madan, and Ramamurtie, 1996), and a method based on Maximum Entropy (following Kelly and Buchen, 1996). By and large the various methods give similar RNDs. Yet, the Hermite expansion approach, by allowing for somewhat dirty options prices, by providing a good fit to options prices, and by being very fast is the retained method for the data at hand. We then consider a daily panel of options running from February 1997 to July 1997. After constructing standardized options, i.e. with a fixed time to maturity, we find that operators in both markets anticipated the snap election a few days before the official announcement and that a substantial amount of political uncertainty subsisted even a month after the elections. The greater liquidity of PIBOR options eases information extraction.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"26 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134501517","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study in this paper a forecasting model for long-term rates based both on the arbitrage-free hypothesis and the agents' rationality. The long-term rate is expressed as an average of expected short-term rates, which are modelized according to three models: two univariate models (with stationary and non-stationary rates) and one model which specifies the long-term anchor for the short-term rate as a function of the agents' expectations. Theses approaches are used to study French and German long-term rates between 1960 and 1996. We find that the model based on agents' expectations gives the best forecasts, especially for short-term horizons.
{"title":"Forecasting French and German Long-Term Rates Using a Rational-Expectation Model (In French)","authors":"E. Jondeau, Franck Sédillot","doi":"10.2139/SSRN.1734662","DOIUrl":"https://doi.org/10.2139/SSRN.1734662","url":null,"abstract":"We study in this paper a forecasting model for long-term rates based both on the arbitrage-free hypothesis and the agents' rationality. The long-term rate is expressed as an average of expected short-term rates, which are modelized according to three models: two univariate models (with stationary and non-stationary rates) and one model which specifies the long-term anchor for the short-term rate as a function of the agents' expectations. Theses approaches are used to study French and German long-term rates between 1960 and 1996. We find that the model based on agents' expectations gives the best forecasts, especially for short-term horizons.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126218375","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper discusses the purposes and limits of " structural " VAR modeling. It explains the choices that modelers have to make at different stages of the procedure. An illustration is provided by an analysis of monetary policy shocks in France over the 1972 : 1-1995 : 2. Compared with previous studies of this country, the main finding is the statistically significant effect of monetary policy on economic activity and inflation. This is found by introducing an additional variable that measures budget policy. The article shows that " structural " VARs can be used to analyse the 1993 recession.
{"title":"Structural VAR Modeling: Application to France's Monetary Policy (In French)","authors":"C. Bruneau, O. de Bandt","doi":"10.2139/SSRN.1734672","DOIUrl":"https://doi.org/10.2139/SSRN.1734672","url":null,"abstract":"This paper discusses the purposes and limits of \" structural \" VAR modeling. It explains the choices that modelers have to make at different stages of the procedure. An illustration is provided by an analysis of monetary policy shocks in France over the 1972 : 1-1995 : 2. Compared with previous studies of this country, the main finding is the statistically significant effect of monetary policy on economic activity and inflation. This is found by introducing an additional variable that measures budget policy. The article shows that \" structural \" VARs can be used to analyse the 1993 recession.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1998-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116223202","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper aims at evaluating the impact of globalization, if any, on inflation and the inflation process. We estimate standard Phillips curve equations on a panel of OECD countries over the last 25 years. We first show that the impact of commodity import price inflation on CPI inflation depends on the volume of commodity imports while the impact of non-commodity import price inflation is independent of the volume of non-commodity imports. Second, focusing on the role of intra-industry trade, we provide preliminary evidence that this variable can account (i) for the low pass-through of import price to consumer price and (ii) for the flattening of the Phillips curve, i.e. the lower sensitivity of inflation to the output gap.
{"title":"Some Preliminary Evidence on the Globalization-Inflation Nexus","authors":"Sophie Guilloux-Nefussi, Enisse Kharroubi","doi":"10.2139/ssrn.1680339","DOIUrl":"https://doi.org/10.2139/ssrn.1680339","url":null,"abstract":"This paper aims at evaluating the impact of globalization, if any, on inflation and the inflation process. We estimate standard Phillips curve equations on a panel of OECD countries over the last 25 years. We first show that the impact of commodity import price inflation on CPI inflation depends on the volume of commodity imports while the impact of non-commodity import price inflation is independent of the volume of non-commodity imports. Second, focusing on the role of intra-industry trade, we provide preliminary evidence that this variable can account (i) for the low pass-through of import price to consumer price and (ii) for the flattening of the Phillips curve, i.e. the lower sensitivity of inflation to the output gap.","PeriodicalId":101534,"journal":{"name":"Banque de France Research Paper Series","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129359796","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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