JEAN-GUILLAUME SAHUC
Professeur(e)
2024-13
Revisiting 15 Years of Unusual Transatlantic Monetary Policies
José Garcia-Revelo, Grégory Levieuge, Jean-Guillaume Sahuc
- Abstract
- The European Central Bank and the Federal Reserve introduced new policy instruments and made changes to their operational frameworks to address the global financial crisis (2008) and the Covid-19 pandemic (2020). We study the macroeconomic effects of these monetary policy evolutions on both sides of the Atlantic Ocean by developing and estimating a tractable two-country dynamic stochastic general equilibrium model. We show that the euro area and the United States faced shocks of different natures, explaining some asynchronous monetary policy measures between 2008 and 2023. However, counterfactual exercises highlight that all conventional and unconventional policies implemented since 2008 have appropriately (i) supported economic growth and (ii) maintained inflation on track in both areas. The exception is the delayed reaction to the inflationary surge during 2021-2022. Furthermore, exchange rate shocks played a significant role in shaping the overall monetary conditions of the two economies.
- Mot(s) clé(s)
- Monetary policy, real exchange rate dynamics, two-country DSGE model, Bayesian estimation, counterfactual exercises
2022-21
Environmental Subsidies to Mitigate Transition risk
Eric Jondeau, Grégory Levieuge, Jean-Guillaume Sahuc, Gauthier Vermandel
- Abstract
- We explore the role of public subsidies in mitigating the transition risk associated with a climate-neutral objective by 2060. We develop and estimate an environmental dynamic stochastic general equilibrium model for the world economy featuring an endogenous market structure for green products. We show that public subsidies, financed by a carbon tax, are an efficient instrument to promote firm entry into the abatement goods sector by fostering competition and lowering the selling price of such products. We estimate that the subsidy, optimally distributed between startups at 60% and existing companies at 40%, will save nearly $2.9 trillion in world GDP each year by 2060.
- Mot(s) clé(s)
- Climate change, E-DSGE model, Bayesian estimation, stochastic growth, endogenous market structure, environment-related products
2022-10
Lost in Negative Territory? Search for Yield!
Mattia Girotti, Guillaume Horny, Jean-Guillaume Sahuc
- Abstract
- We study how negative interest rate policy (NIRP) affects banks’ loan pricing. Using contract-level data from France, we show that NIRP affects bank lending rates to firms through a portfolio rebalancing channel: banks holding a one standard deviation more of cash and central bank reserves offer a 8.6 basis points lower loan rate after NIRP is introduced. The impact concentrates on medium-term loans (with maturity comprised between three and six years) but not on loans to risky firms, indicating that banks conduct a search for yield focused on term spreads. These findings suggest that NIRP complements quantitative easing policies.
- Mot(s) clé(s)
- Negative interest rates, portfolio rebalancing, search for yield, term spreads, banks
2022-3
Assessing the Impact of Basel III: Evidence from Structural Macroeconomic Models
Bora Durdu, Hibiki Ichiue, Yasin Mimir, Jolan Mohimont, Kalin Nikolov, Sigrid Roehrs, Jean-Guillaume Sahuc, Valério Scalone, Michael Straughan, Olivier de Bandt
- Abstract
- This paper (i) reviews the different channels of transmission of prudential policy highlighted in the literature and (ii) provides a quantitative assessment of the impact of Basel III reforms using "off-the-shelf" DSGE models. It shows that the effects of regulation are positive on GDP whenever the costs and benefits of regulation are both introduced. However, this result may be associated with a temporary economic slowdown in the transition to Basel III, which can be accommodated by monetary policy. The assessment of liquidity requirements is still an area for research, as most models focus on costs, rather than on benefits, in particular in terms of lower contagion risk.
- Mot(s) clé(s)
- Basel III reforms, DSGE models, solvency requirements, liquidity requirements
2022-4
A Tiering Rule to Balance the Impact of Negative Policy Rates on Banks
Mattia Girotti, Benoît Nguyen, Jean-Guillaume Sahuc
- Abstract
- Negative interest rate policy makes excess liquidity costly to hold for banks and this may weaken the bank-based transmission of monetary policy. We design a rule-based tiering system for excess reserve remuneration that reduces the burden of negative rates on banks while ensuring that the central bank keeps control of interbank interest rates. Using euro-area data, we show that under the proposed tiering system, the aggregate cost of holding excess liquidity when the COVID-19 monetary stimulus fully unfolds would be more than 36% lower than that under the ECB’s current system.
- Mot(s) clé(s)
- Negative interest rates, excess liquidity, tiering system, bank profitability, interbank market
2020-13
Taming Debt: Can GDP-Linked Bonds Do the Trick?
Sarah Mouabbi, Jean-Paul Renne, Jean-Guillaume Sahuc
- Abstract
- We study the debt-stabilizing properties of indexing debt to GDP using a consumption-based macro-finance model. Three results stand out: (i) GDP-linked bond prices would embed sizeable and time-varying risk premiums of about 40 basis points, (ii) for a fixed budget surplus, issuing GDP-linked bonds does not necessarily imply more beneficial debt-to-GDP ratios in the medium- to long-run, and (iii) the debt-stabilizing budget surplus is more predictable under such issuances at the expense of being higher on average. Our findings call into question the view that GDP-linked bonds tame debt.
- Mot(s) clé(s)
- GDP-linked bonds, debt stabilization, consumption-based model, term structure
2020-6
Monetary Policy Transmission with Downward Interest Rate Rigidity
Grégory Levieuge, Jean-Guillaume Sahuc
- Abstract
- Empirical evidence suggests that the pass-through from policy to retail bank rates is asymmetric in the euro area. Bank lending rates adjust more slowly and less completely to Eonia decreases than to increases. We investigate how this downward interest rate rigidity affects the response of the economy to monetary policy shocks. To this end, we introduce asymmetric bank lending rate adjustment costs in a macrofinance dynamic stochastic general equilibrium model. We find that the initial response of GDP to a negative monetary policy shock is 25% lower than its response to a positive shock of similar amplitude. This implies that a central bank would have to decrease its policy rate by 50% to 75% more to obtain a medium-run impact on GDP that would be symmetric to the impact of the positive shock. We also show that downward interest rate rigidity is stronger when policy rates are stuck at their effective lower bound, further disrupting monetary policy transmission. These findings imply that neglecting asymmetry in retail interest rate adjustments may yield misguided monetary policy decisions.
- Mot(s) clé(s)
- Downward interest rate rigidity, asymmetric adjustment costs, banking sector, DSGE model, euro area.
2020-3
Unconventional Monetary Policies: A Stock-Taking Exercise
Christian Pfister, Jean-Guillaume Sahuc
- Abstract
- This paper takes stock of the literature on 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 forward guidance and large-scale asset purchases. Overall, there is near consensus that these measures have been useful, although there are a few dissenting views. Because unconventional monetary policies have left their mark on economies and on the balance sheets of central banks, we offer insights into their legacy and ask whether they have led to a change in “the rules of the game” for setting interest rates and choosing the size and composition of central banks’ balance sheets. Finally, we discuss whether to modify the objectives and the instruments of monetary policy in the future, in comparison with the pre-crisis situation.
- Mot(s) clé(s)
- Unconventional monetary policies.
2019-2
Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies
Sarah Mouabbi, Jean-Guillaume Sahuc
- Abstract
- We quantify the macroeconomic effects of the European Central Bank’s unconventional monetary policies using a DSGE model which includes a set of shadow interest rates. Extracted from the yield curve, these shadow rates provide unconstrained measures of the overall stance of monetary policy. Counterfactual analyses show that, without unconventional measures, the euro area would have suffered (i) a substantial loss of output since the Great Recession and (ii) a period of deflation from mid-2015 to early 2017. Specifically, year-on-year inflation and GDP growth would have been on average about 0.61% and 1.09% below their actual levels over the period 2014Q1-2017Q2, respectively.
- Mot(s) clé(s)
- Unconventional monetary policy, shadow policy rate, DSGE model, euro area.
Please wait ...