Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1916
G. Cette, Simon Corde, R. Lecat
[eng] The productivity slowdown has been analysed either as an effect of the crisis, resulting from the financial and demand shocks, or as a more structural decline. In France, using macroeconomic and microeconomic data, we identify downward breaks in the trends of labour productivity and total factor productivity in the 2000s, several years before the crisis. These breaks result in historically weak rhythms of the trends. Using data on firms located in France, we highlight that, at the technological frontier, productivity has accelerated, especially over the recent period, which contradicts the hypothesis of a decline in innovation. The most productive firms in a given year do not, however, improve their relative advantage. The convergence of firms’ productivity does not seem to have slowed down in the 2000s, which does not confirm the hypothesis of a decrease in the dissemination of innovation. On the other hand, the dispersion of productivity between firms has increased, which suggests increasing difficulties in the reallocation of production factors, labour and capital, between firms.
{"title":"Stagnation of productivity in France: a legacy of the crisis or a structural slowdown ?","authors":"G. Cette, Simon Corde, R. Lecat","doi":"10.24187/ECOSTAT.2017.494T.1916","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1916","url":null,"abstract":"[eng] The productivity slowdown has been analysed either as an effect of the crisis, resulting from the financial and demand shocks, or as a more structural decline. In France, using macroeconomic and microeconomic data, we identify downward breaks in the trends of labour productivity and total factor productivity in the 2000s, several years before the crisis. These breaks result in historically weak rhythms of the trends. Using data on firms located in France, we highlight that, at the technological frontier, productivity has accelerated, especially over the recent period, which contradicts the hypothesis of a decline in innovation. The most productive firms in a given year do not, however, improve their relative advantage. The convergence of firms’ productivity does not seem to have slowed down in the 2000s, which does not confirm the hypothesis of a decrease in the dissemination of innovation. On the other hand, the dispersion of productivity between firms has increased, which suggests increasing difficulties in the reallocation of production factors, labour and capital, between firms.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84650932","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1923
A. Cartapanis
[eng] Three articles of this special issue evaluate the effects of unconventional monetary policies and the relationships between new capital requirements and bank profitability. These articles present several similarities: two of them draw on individual bank data and not on aggregated data; they highlight the combined consequences of several shocks, by introducing an interaction term between several variables; they conclude to a strong heterogeneity or a heightened magnitude of the effects brought on credit or bank profitability. That comment will underline that if policies of liquidity injections at a time of stress are especially efficient as they draw on widened collaterals, then it is important to keep certain unconventional instruments in the central banks’ toolbox, including outside times of crisis. And if the transmission channels from these policies to lending rates demand close coordination with the fixing of short term interest rates and turn out to have heterogeneous effects due to each banking intermediary’s specific situation, then rates policy must be closely correlated to both microprudential and macroprudential policies.
{"title":"Comment - Monetary policies and financial crisis: Towards a new central banking","authors":"A. Cartapanis","doi":"10.24187/ECOSTAT.2017.494T.1923","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1923","url":null,"abstract":"[eng] Three articles of this special issue evaluate the effects of unconventional monetary policies and the relationships between new capital requirements and bank profitability. These articles present several similarities: two of them draw on individual bank data and not on aggregated data; they highlight the combined consequences of several shocks, by introducing an interaction term between several variables; they conclude to a strong heterogeneity or a heightened magnitude of the effects brought on credit or bank profitability. That comment will underline that if policies of liquidity injections at a time of stress are especially efficient as they draw on widened collaterals, then it is important to keep certain unconventional instruments in the central banks’ toolbox, including outside times of crisis. And if the transmission channels from these policies to lending rates demand close coordination with the fixing of short term interest rates and turn out to have heterogeneous effects due to each banking intermediary’s specific situation, then rates policy must be closely correlated to both microprudential and macroprudential policies.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89690953","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}
Pub Date : 2017-10-11DOI: 10.24187/ecostat.2017.494t.1926
Delphine Brochard, Corinne Perraudin
[eng] This paper explores the employment and wage adjustments and business reorganisation implemented by French establishments between 2008 and 2010, using data from the Dares REPONSE survey. Drawing up a typology of adjustment practices based on a statistical classification, it reveals a diversity of practices illustrating the complementarity of these adjustments. Then the paper analyses the characteristics of the different classes of establishments and the links between practices, the flexibility levers available to the establishments and their economic and financial dependency relationships, taking into account the diversity of economic and social contexts. While recourse to temporary contracts and subcontracting does not seem to be significant, the use of flexible pay components (individual pay rises and performance bonuses) and worker versatility affect the adjustments made by establishments. Likewise, being majority foreign-owned, being a subsidiary of a (listed or unlisted) group, or being part of a subcontracting chain emerge from the analysis as significant factors affecting these adjustments.
{"title":"Crisis adjustment strategies in France: The contribution of establishment-level data","authors":"Delphine Brochard, Corinne Perraudin","doi":"10.24187/ecostat.2017.494t.1926","DOIUrl":"https://doi.org/10.24187/ecostat.2017.494t.1926","url":null,"abstract":"[eng] This paper explores the employment and wage adjustments and business reorganisation implemented by French establishments between 2008 and 2010, using data from the Dares REPONSE survey. Drawing up a typology of adjustment practices based on a statistical classification, it reveals a diversity of practices illustrating the complementarity of these adjustments. Then the paper analyses the characteristics of the different classes of establishments and the links between practices, the flexibility levers available to the establishments and their economic and financial dependency relationships, taking into account the diversity of economic and social contexts. While recourse to temporary contracts and subcontracting does not seem to be significant, the use of flexible pay components (individual pay rises and performance bonuses) and worker versatility affect the adjustments made by establishments. Likewise, being majority foreign-owned, being a subsidiary of a (listed or unlisted) group, or being part of a subcontracting chain emerge from the analysis as significant factors affecting these adjustments.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80648379","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1922
Olivier de Bandt, Boubacar Camara, P. Pessarossi, M. Rose
The article studies the effect of French banks’ capitalisation on their profitability. It contributes to the debate which has emerged, following the financial crisis, on the impact of the tightening of the regulation of capital (Basel III). Our econometric results show that over the period of 1993-2012, beyond the general trend of profitability which is weaker after the crisis, banks which increase their capital ratio more than the average improve their profitability, without it being possible to distinguish between voluntary increases and those imposed by regulation. All else being equal, a 100 basis point increase of the different capitalisation measures leads to a 3 to 10% increase in the average return on equity (ROE), depending on the measures considered, and to a 7 to 30% increase in the average return on assets (ROA). The positive impact of an increase of capitalisation on ROA is less significant when it is done by issuing shares.
{"title":"Can better capitalised banks be more profitable? An analysis of large French banking groups before and after the financial crisis","authors":"Olivier de Bandt, Boubacar Camara, P. Pessarossi, M. Rose","doi":"10.24187/ECOSTAT.2017.494T.1922","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1922","url":null,"abstract":"The article studies the effect of French banks’ capitalisation on their profitability. It contributes to the debate which has emerged, following the financial crisis, on the impact of the tightening of the regulation of capital (Basel III). Our econometric results show that over the period of 1993-2012, beyond the general trend of profitability which is weaker after the crisis, banks which increase their capital ratio more than the average improve their profitability, without it being possible to distinguish between voluntary increases and those imposed by regulation. All else being equal, a 100 basis point increase of the different capitalisation measures leads to a 3 to 10% increase in the average return on equity (ROE), depending on the measures considered, and to a 7 to 30% increase in the average return on assets (ROA). The positive impact of an increase of capitalisation on ROA is less significant when it is done by issuing shares.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74138401","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1917
Flora Bellone
[eng] The article by Cette, Corde and Lecat presented in this special issue brings new stylised facts and a rich and fruitful discussion on the causes of the slowdown of productivity growth observed in France over the last decade. The facts established are solid. They back up the hypothesis that this slowdown is not a cyclical phenomenon, linked to the crisis of 2008, but is a structural phenomenon whose causes remain difficult to pin down. The authors put forward as a possible explanation the difficulties in reallocating resources between companies, linked . notably to rigidities on labour markets and to regulations on goods markets. This comment aims to explain why the facts highlighted by Cette, Corte and Lecat are not sufficient to exclude other, alternative explanations which bring, in a more direct way, the shocks of globalisation and digitalisation into play. It draws conclusions from them in the perspective of future lines of research and recommendations of economic policy, in particular keeping aggregate productivity, not productivity at the frontier, as a target of policy action, and also considering, for each action, the risk of impoverishing reallocations.
{"title":"Comment - Productivity slowdown and loss of allocative efficiency: A French disease?","authors":"Flora Bellone","doi":"10.24187/ECOSTAT.2017.494T.1917","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1917","url":null,"abstract":"[eng] The article by Cette, Corde and Lecat presented in this special issue brings new stylised facts and a rich and fruitful discussion on the causes of the slowdown of productivity growth observed in France over the last decade. The facts established are solid. They back up the hypothesis that this slowdown is not a cyclical phenomenon, linked to the crisis of 2008, but is a structural phenomenon whose causes remain difficult to pin down. The authors put forward as a possible explanation the difficulties in reallocating resources between companies, linked . notably to rigidities on labour markets and to regulations on goods markets. This comment aims to explain why the facts highlighted by Cette, Corte and Lecat are not sufficient to exclude other, alternative explanations which bring, in a more direct way, the shocks of globalisation and digitalisation into play. It draws conclusions from them in the perspective of future lines of research and recommendations of economic policy, in particular keeping aggregate productivity, not productivity at the frontier, as a target of policy action, and also considering, for each action, the risk of impoverishing reallocations.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87243657","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1918
A. Beyer, B. Coeuré, Caterina Mendicino
[eng] Ten years after the global and European financial crises, significant progress has been made both in financial and economic research to address the shortcomings of mainstream modelling frameworks used to inform monetary and financial policymaking. This article first reviews the progress made in the field of econometric modelling, namely more elaborated financial sectors, partial non-linearity, addressing the effective lower bound for interest rates, and dealing with heterogeneity across countries and economic agents. We then describe how such progress has helped assessing the impact of unconventional monetary policy and the interaction between monetary and prudential policies, also building on the extensive use of micro‑data. We conclude that more research remains needed on the transmission of negative rates and their financial stability repercussions, and to understand better central bank communication (including forward guidance on monetary policy) by introducing elements of bounded rationality. Research remains also needed on building models with more heterogeneous agents, given the relevance of heterogeneity for the transmission of monetary policy and the rising importance of inequality in the broader policy discussion.
{"title":"Foreword ‒ The crisis, ten years after : Lessons learnt for monetary and financial research","authors":"A. Beyer, B. Coeuré, Caterina Mendicino","doi":"10.24187/ECOSTAT.2017.494T.1918","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1918","url":null,"abstract":"[eng] Ten years after the global and European financial crises, significant progress has been made both in financial and economic research to address the shortcomings of mainstream modelling frameworks used to inform monetary and financial policymaking. This article first reviews the progress made in the field of econometric modelling, namely more elaborated financial sectors, partial non-linearity, addressing the effective lower bound for interest rates, and dealing with heterogeneity across countries and economic agents. We then describe how such progress has helped assessing the impact of unconventional monetary policy and the interaction between monetary and prudential policies, also building on the extensive use of micro‑data. We conclude that more research remains needed on the transmission of negative rates and their financial stability repercussions, and to understand better central bank communication (including forward guidance on monetary policy) by introducing elements of bounded rationality. Research remains also needed on building models with more heterogeneous agents, given the relevance of heterogeneity for the transmission of monetary policy and the rising importance of inequality in the broader policy discussion.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91167775","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1921
J. Barthélemy, V. Bignon, Benoît Nguyen
[eng] This paper assesses the effect on banks’ lending activity of accepting illiquid collateral at the central bank refinancing facility in times of wholesale funding stress. We exploit original data on the loans granted by the 177 largest euro area banks between 2011m1 and 2014m12 and on the composition of their pool of collateral pledged with the Eurosystem. During this period, two-thirds of the banks in our sample experienced a sizable loss of wholesale funding. Panel regression estimates show that the banks that pledged more illiquid collateral with the Eurosystem reduced their lending to non-financial firms and households less : a one standard deviation increase in the volume of illiquid collateral pledged corresponded to a 1.1 % increase in loans to the economy. This result holds for banks that were and were not run. Our finding thus suggests that the broad range of collateral eligible in the euro area may have helped to mitigate the credit crunch during the euro debt crisis.
{"title":"Monetary policy, illiquid collateral and bank lending during the European sovereign debt crisis","authors":"J. Barthélemy, V. Bignon, Benoît Nguyen","doi":"10.24187/ECOSTAT.2017.494T.1921","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1921","url":null,"abstract":"[eng] This paper assesses the effect on banks’ lending activity of accepting illiquid collateral at the central bank refinancing facility in times of wholesale funding stress. We exploit original data on the loans granted by the 177 largest euro area banks between 2011m1 and 2014m12 and on the composition of their pool of collateral pledged with the Eurosystem. During this period, two-thirds of the banks in our sample experienced a sizable loss of wholesale funding. Panel regression estimates show that the banks that pledged more illiquid collateral with the Eurosystem reduced their lending to non-financial firms and households less : a one standard deviation increase in the volume of illiquid collateral pledged corresponded to a 1.1 % increase in loans to the economy. This result holds for banks that were and were not run. Our finding thus suggests that the broad range of collateral eligible in the euro area may have helped to mitigate the credit crunch during the euro debt crisis.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84908386","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}
Pub Date : 2017-10-11DOI: 10.24187/ecostat.2017.494t.1915
Daniel Cohen
[eng] The crisis celebrates its tenth anniversary, offering economists a lesson in modesty and a great opportunity to take a new look at their understanding of the world. The effect of a zero lower bound on interest rates on the efficiency of economic policies, the Keynesian multiplier measure, the issue of the growth slowdown being a cause or consequence of the crisis, the effect of rising uncertainties on households’ and firms’ behaviour, the effectiveness of macro-prudential stabilisation, the impact of inequalities on the functioning of the credit market, the way in which the coordination of macro-economic policies in Europe is designed and promoted : all these crucial questions are part of the economists’ research programme, and this special issue offers a rich review of the progress already achieved.
{"title":"Introduction – Ten long years of crisis","authors":"Daniel Cohen","doi":"10.24187/ecostat.2017.494t.1915","DOIUrl":"https://doi.org/10.24187/ecostat.2017.494t.1915","url":null,"abstract":"[eng] The crisis celebrates its tenth anniversary, offering economists a lesson in modesty and a great opportunity to take a new look at their understanding of the world. The effect of a zero lower bound on interest rates on the efficiency of economic policies, the Keynesian multiplier measure, the issue of the growth slowdown being a cause or consequence of the crisis, the effect of rising uncertainties on households’ and firms’ behaviour, the effectiveness of macro-prudential stabilisation, the impact of inequalities on the functioning of the credit market, the way in which the coordination of macro-economic policies in Europe is designed and promoted : all these crucial questions are part of the economists’ research programme, and this special issue offers a rich review of the progress already achieved.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85273207","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1925
Pierre Pora, L. Wilner
[eng] The uncertain nature of future income limits the ability of agents to smooth their consumption over time. Variation in this uncertainty can thus bring about variation in well-being. We study the evolutions of the uncertainty on wage income in France before and over the course of the crisis of 2008 drawing on longitudinal administrative data. Using a non-parametric method, we estimate the magnitude and form of this uncertainty and show that they depend on past wage income. This uncertainty is broken down into wage and working time, and according to the mobility of the wage earners. During the crisis, the magnitude of this uncertainty on future wage income increases slightly, and its downward asymmetry is stronger at both ends of the wage income scale : with this uncertainty, unfavourable evolutions have a bigger impact during the crisis than in the preceding period. This is explained by a heightened probability of unfavourable individual evolutions in terms of working time for the lowest-paid workers, and in terms of wage for the highest-paid. Mobility is more frequent during the crisis but the uncertainty associated with it is lower than over the preceding years.
{"title":"The individual dynamics of wage income in France during the crisis","authors":"Pierre Pora, L. Wilner","doi":"10.24187/ECOSTAT.2017.494T.1925","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1925","url":null,"abstract":"[eng] The uncertain nature of future income limits the ability of agents to smooth their consumption over time. Variation in this uncertainty can thus bring about variation in well-being. We study the evolutions of the uncertainty on wage income in France before and over the course of the crisis of 2008 drawing on longitudinal administrative data. Using a non-parametric method, we estimate the magnitude and form of this uncertainty and show that they depend on past wage income. This uncertainty is broken down into wage and working time, and according to the mobility of the wage earners. During the crisis, the magnitude of this uncertainty on future wage income increases slightly, and its downward asymmetry is stronger at both ends of the wage income scale : with this uncertainty, unfavourable evolutions have a bigger impact during the crisis than in the preceding period. This is explained by a heightened probability of unfavourable individual evolutions in terms of working time for the lowest-paid workers, and in terms of wage for the highest-paid. Mobility is more frequent during the crisis but the uncertainty associated with it is lower than over the preceding years.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91018083","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}
Pub Date : 2017-10-11DOI: 10.24187/ECOSTAT.2017.494T.1919
J. Boussard, B. Campagne
[eng] Following the 2008 Financial Crisis, Euro Area governments faced adverse economic environments: high ratios of public debt to GDP, depressed outputs and the prospect of monetary policy hitting the zero lower bound (ZLB). This article assesses to what extent the conduct of fiscal policy differs within a monetary union at the ZLB. Using a fiscal DSGE model with two regions (North and South) calibrated to replicate the conditions where, absent any additional shock, the Euro Area economy would have been stuck at the ZLB for three years starting in 2013, we show that cross-border spillovers from fiscal policy are substantially higher without monetary offset and increase with the extent of fiscal consolidation measures. Spillovers can amount up to half (resp. one sixth) of the domestic impact in the case of VAT-based (resp. spending-based) consolidations. Outside the ZLB, fiscal expansion in one region triggers monetary tightening which has negative effect in the whole union, and gives rise to gains from fiscal cooperation. At the ZLB however, national objectives tend to be closer and the coordinated policy is less consolidating. Moreover, cooperation encourages symmetric rather than asymmetric policies.
{"title":"Fiscal policy coordination in a monetary union at the zero lower bound","authors":"J. Boussard, B. Campagne","doi":"10.24187/ECOSTAT.2017.494T.1919","DOIUrl":"https://doi.org/10.24187/ECOSTAT.2017.494T.1919","url":null,"abstract":"[eng] Following the 2008 Financial Crisis, Euro Area governments faced adverse economic environments: high ratios of public debt to GDP, depressed outputs and the prospect of monetary policy hitting the zero lower bound (ZLB). This article assesses to what extent the conduct of fiscal policy differs within a monetary union at the ZLB. Using a fiscal DSGE model with two regions (North and South) calibrated to replicate the conditions where, absent any additional shock, the Euro Area economy would have been stuck at the ZLB for three years starting in 2013, we show that cross-border spillovers from fiscal policy are substantially higher without monetary offset and increase with the extent of fiscal consolidation measures. Spillovers can amount up to half (resp. one sixth) of the domestic impact in the case of VAT-based (resp. spending-based) consolidations. Outside the ZLB, fiscal expansion in one region triggers monetary tightening which has negative effect in the whole union, and gives rise to gains from fiscal cooperation. At the ZLB however, national objectives tend to be closer and the coordinated policy is less consolidating. Moreover, cooperation encourages symmetric rather than asymmetric policies.","PeriodicalId":38830,"journal":{"name":"Economie et Statistique","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2017-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87164811","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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