Publications: Working papers

Publications: Working papers 2020

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2020-1 "Asymmetric price transmission along the food marketing chain: A focus on the recent price war."

Chouaib Jouf

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Abstract
This paper investigates the price transmission along the food marketing chain in France. We focus on this transmission at the upstream and downstream levels during the so-called "price war" waged by the retailers in the French market. To this aim, we rely on an asymmetric cointegration approach: the Nonlinear Autoregressive Distributed Lag (NARDL) model. We find that although the asymmetric price transmission is effective along the French food marketing chain, it is more pronounced at the downstream level, illustrating that agri-food companies are the main losers of the recent war price in the food sector.
Classification-JEL
C13, C22, Q11, Q13
Mot(s) clé(s)
Food sector, Price transmission, Asymmetry, Nonlinear ARDL model
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2020-2 "Banks to basics! Why banking regulation should focus on equity"

Pierre Durand, Gaëtan Le Quang

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Abstract
Banking regulation faces multiple challenges that call for rethinking the way it is designed in order to tackle the specific risks associated with banking activities. In this paper, we argue that regulators should focus on designing strong equity requirements instead of implementing several complex rules. Such a constraint in equity is however opposed by the banking industry because of its presumed adverse impact on banks' performance. Resorting to Random Forest regressions on a large dataset of banks balance sheet variables, we show that the ratio of equity over total assets has a clear positive effect on banks' performance, as measured by the return on assets. On the contrary, the impact of this ratio on the shareholder value, as measured by the return on equity, is most of the time weakly negative. Strong equity requirements do not, therefore, impede banks' performance but do reduce the shareholder value. This may be the reason why the banking industry so fiercely opposes strong equity requirements.
Classification-JEL
C44, G21, G28
Mot(s) clé(s)
Banking regulation ; Capital requirements ; Basel III ; Random Forest Regression
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2020-3 "Unconventional Monetary Policies: A Stock-Taking Exercise"

Christian Pfister, Jean-Guillaume Sahuc

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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.
Classification-JEL
E52, E58.
Mot(s) clé(s)
Unconventional monetary policies.
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2020-4 "Covid-19 : analyse spatiale de l’influence des facteurs socio-économiques sur la prévalence et les conséquences de l’épidémie dans les départements français"

Mounir Amdaoud, Giuseppe Arcuri, Nadine Levratto

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Abstract
This paper analyses the socio-economic determinants of hospitalizations and death rates related to Covid-19 on the one hand, and the excess mortality observed this year compared to previous ones, on the other. It proposes a territorial approach to these questions thanks to the use of data calculated at the French departments level. The exploratory spatial analysis carried out reveals the heterogeneity and spatial autocorrelation of the disease and its consequences. The use of spatial econometric models, then, allows us to highlight the influence of demographic density, social inequalities, part of blue-collars in the active population and emergency services on the studied phenomena.
Classification-JEL
C21, I14, R23
Mot(s) clé(s)
Covid-19, local variables, spatial analysis
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2020-5 "Are business angel-backed companies truly different? a comparative analysis of the financial structure"

Nadine Levratto, Julien Salin

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Abstract
Through a new eye on corporate finance theories of small firms and of business angel financing determinants, this paper reconsiders the impact of Business Angels on financial structure of backed firms using matching method and a unique individual dataset of French companies over the 2009-2015 period. It shows that the signal effect of Business angel investment, improving access to external finance from another investor is limited. This paper contributes to the corporate finance literature by investigating on the validity of principal corporate finance theories. It also brings insight to the understanding of value added of BA on backed firms.
Classification-JEL
G24, L25, L26, M13, O16
Mot(s) clé(s)
Keywords: Business angels, Financial Structure, Informal venture capital, Matching techniques
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2020-6 "Monetary Policy Transmission with Downward Interest Rate Rigidity"

Grégory Levieuge, Jean-Guillaume Sahuc

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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.
Classification-JEL
E32, E44, E52.
Mot(s) clé(s)
Downward interest rate rigidity, asymmetric adjustment costs, banking sector, DSGE model, euro area.
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2020-7 "Pratiques et doctrine des banques centrales au défi du changement climatique : rupture ou continuité ?"

Laurence Scialom

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Abstract
Central banks are faced with the financial challenge of climate change: on the one hand, the need for a massive reallocation of financial flows from "brown" to "green" activities and sectors and on the other hand climate related financial risks considered as systemic. Responding to this challenge will lead to profound changes in their doctrine and practices. This article shows that history is punctuated by such rapid changes in central banking. It analyses the arguments for integrating financial climate risks into central banks' doctrine and operational framework and attempts to explore what a greening of central bank actions might mean in practice.
Classification-JEL
Code JEL : E5,N,Q5
Mot(s) clé(s)
central banking, climate change, climate related financial risk
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2020-8 "International Economic Sanctions: Multipurpose Index Modelling in the Ukrainian Crisis Case"

BALI Morad, Nady Rapelanoro

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Abstract
This short paper’s goal is to create a sanction index to simulate international economic sanctions. To do so, it has been decided to focus on the Ukrainian crisis case, and on international sanctions against the Russian Federation. The first part of this paper treats the methodology and mathematical formalization used to build our index. After the mathematical formalization comes an empirical part that is demonstrating improvements brought by our work. To assess these improvements, our index is compared to a previously developed index from Kholodilin and Netšunajev (2016). Four country SVAR models are used in two main sections, two initials and two extended. Results of this section reveal that our new sanction index has a stronger explanatory power. In addition, it seems that our index affects short-term Russian production variations more sharply than its predecessor. The explanatory power improvements are confirmed by extended models, confirming our index relevance.
Classification-JEL
F4; C5
Mot(s) clé(s)
Russian economy, European economies, Ukrainian crisis, economic sanctions, sanctions shock, trade relations, international crisis, structural vector autoregressive models
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2020-9 "Currency misalignments and exchange rate regimes in Latin American countries: a trade-off issue"

Jorge Carrera, Blaise Gnimassoun, Valérie Mignon, Romain Restout

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Abstract
This paper conducts an in-depth empirical investigation on the impact of the exchange rate regime (ERR) on real currency misalignments in a panel of 17 Latin American countries over the 1970-2016 period. We consider explicitly the two dimensions of misalignments, size and persistence, and evaluate four different ERR classifications. We also pay attention to cross-sectional dependencies across countries that appear to be important in Latin America, and provide several robustness checks. Our main findings show that, although fixed ERR perform well in limiting the size of misalignments—and in reducing inflation and fiscal deficit—the disequilibria are more persistent. On the contrary, allowing for more flexibility reduces persistence but increases the size of misalignments. Overall, we show that Latin American countries face a crucial trade-off when they have to choose their ERR.
Classification-JEL
F31; C23; E42
Mot(s) clé(s)
Latin American countries; Exchange rate regimes; Currency misalignments
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2020-10 "Learning, house prices and macro-financial linkages"

Pauline Gandré

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Abstract
In the US, the linkages between the housing market, the credit market and the real sector have been striking in the past decades. To explain these linkages, I develop a small-scale DSGE model in which agents update non-rational beliefs about future house price growth, in accord with recent survey data evidence. Conditional on subjective house price beliefs, expectations are model-consistent. In the model with non-rational expectations, both standard productivity shocks and shocks in the credit sector generate endogenously persistent booms in house prices. Long-lasting excess volatility in house prices, in turn, affects the financial sector (because housing assets serve as collateral for household and entrepreneurial debt), and propagates to the real sector. This amplification and propagation mechanism improves the ability of the model to explain empirical puzzles in the US housing market and to explain the macro-financial linkages during 1985-2019. The learning model can also replicate the predictability of forecast errors evidenced in survey data.
Classification-JEL
D83, D84, E32, E44, G12.
Mot(s) clé(s)
Housing booms, Financial Accelerator, Business Cycles, Non-rational Expectations, Learning.
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2020-11 "When are Google data useful to nowcast GDP? An approach via pre-selection and shrinkage"

Laurent Ferrara, Anna Simoni

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Abstract
We analyse whether, and when, a large set of Google search data can be useful to increase GDP nowcasting accuracy once we control for information contained in official variables. We put forward a new approach that combines variable pre-selection and Ridge regularization and we provide theoretical results on the asymptotic behaviour of the estimator. Empirical results on the euro area show that Google data convey useful information for pseudo-real-time nowcasting of GDP growth during the four first weeks of the quarter, when macroeconomic information is lacking. However, as soon as official data become available, their relative nowcasting power vanishes. In addition, a true real-time analysis confirms that Google data constitute a reliable alternative when official data are lacking.
Classification-JEL
C53, C55, E37
Mot(s) clé(s)
Nowcasting, Big data, Google search data, Sure Independence Screening, Ridge Regularization
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2020-12 "Qualité des études d'impact et travail parlementaire"

Benjamin Monnery, Bertrand du Marais

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Abstract
Since 2009, the French Government is required to produce a regulatory impact assessment (RIA) of the bills introduced in the Parliament, in order to document ex-ante their legal, economic, social or environmental consequences. This article proposes a statistical analysis of a sample of thirty impact assessments published from june 2017 to august 2019, representing about half of the new bills over this period. First, the article documents the heterogeneous and often mediocre quality of impact assessments through a series of indicators, and attempts to identify the determinants of such quality. Second, the article investigates the use of RIA by parliamentarians under the current 15th legislature and shows that, while this use is limited and mostly driven by opposition parties, better RIA can definitely contribute to parliamentary work. Finally, the reasons for the relatively poor quality of RIA and ways for improvement are discussed.
Classification-JEL
D61 ; D78 ; H70
Mot(s) clé(s)
regulatory impact assessments ; ex-ante evaluation ; Parliament ; Government
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2020-13 "Taming Debt: Can GDP-Linked Bonds Do the Trick?"

Sarah Mouabbi, Jean-Paul Renne, Jean-Guillaume Sahuc

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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.
Classification-JEL
H62, H63, E43, E44.
Mot(s) clé(s)
GDP-linked bonds, debt stabilization, consumption-based model, term structure
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2020-14 "It Takes a Village to Raise a Child. Impact Evaluation of the Training for Volunteers in Health and the Nutritional Recovery Cycles in West Guatemala"

Juliana Yael Milovich, Elena Villar

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Abstract
The highest rates of child undernutrition in Guatemala are found in Western regions, where more than half of the children under five are stunted and almost 20% underweight. However, despite the large incidence of undernutrition in the country, there is no robust evidence of its determinants, effects and possible solutions. Our study analyses the impact of a program implemented by the Foundation FUNDAP in West Guatemala, Volunteers in Health, on the nutritional health of children under five years of age. We provide new evidence on how training women at the community level to provide information on infants' nutrition to mothers, together with the monitoring of children's growth and the supply of food supplements, contributes to significantly reduce the probability of children being underweight in West Guatemala.
Classification-JEL
I38, J1, I18
Mot(s) clé(s)
Child Undernutrition, Women's Training, Health Programs, Impact Evaluation
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2020-15 "Why do insurers fail? A comparison of life and non-life insolvencies using a new international database"

George Overton, Olivier de Bandt

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Abstract
Plantin & Rocher (2016) document how insurers often engage in risk-shifting years before the materialization of a failure. This paper empirically examines this claim by testing the mechanisms of insurance insolvency, using a first-of-its-kind international database assembled by the authors which merges data on balance sheet and income statements together with information on impairments over the last 30 years. Employing different fixed effects logistic specifications and parametric survival models, the paper presents evidence, on top of the role of profitability as a leading indicator of failures, of the intrinsic asymmetries between the life and non-life insurance sectors. In the life sector, asset mix is highly significant in predicting an impairment, while operating efficiency plays no role. In the non-life sector, the opposite proves true.
Classification-JEL
G22, G01, G11
Mot(s) clé(s)
Insurance, insolvency prediction, leading indicators, financial crises
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2020-16 "Exchange rate predictive densities and currency risks: A quantile regression approach"

Niango Ange Joseph Yapi

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Abstract
We investigate the ability of the Fama equation to compute proper conditional densities and currency risks. Based on quantile regressions, we fit a Skewed t-distribution to estimate the conditional densities on the monetary policy of eight currency pairs. We demonstrate that the conditional densities are highly sensitive to the monetary policy stances. Then, we use the estimated conditional densities to measure the currency risks. Our results highlight that the depreciation/appreciation risks are extremely heterogeneous and that the currencies are more exposed to depreciation risks, especially during turmoils. Our findings can be used as a supplementary tool to assess whether a currency behaves as a safe-haven currency. We also investigate the relative and absolute performance of our model in forecasting densities. We find that the predictive densities are perfectly well-calibrated. Moreover, our results also demonstrate that our methodology can outperform the random walk in forecasting densities.
Classification-JEL
C22, C53, F31
Mot(s) clé(s)
Quantile regressions, Predictive densities, Currency risks, Safe-haven currency.
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2020-17 "The Wage-Maximisation Property"

Christian Bidard

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Abstract
For linear single-product models, the competitive long-run technique is wage maximising at a given rate of profit. The property is extended to multiple-product systems that satisfy an additional hypothesis called robustness. In particular, the nonsubstitution property implies that all prices are minimum in terms of wage. The result applies to several types of models, including production with fixed capital. On the robustness hypothesis, the wage-maximisation property can be seen as the counterpart in value terms of the golden rule.
Classification-JEL
B24, C62, D41, D51
Mot(s) clé(s)
Nonsubstitution, wage maximisation, golden rule, fixed capital, Sraffa.
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2020-18 "Robustness of the Balassa-Samuelson effect: evidence from developing and emerging economies"

Florian Morvillier

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Abstract
This paper aims at investigating the robustness of the Balassa-Samuelson (BS) effect to alternative proxies for a panel of 38 developing and emerging economies over the period 1980-2016. We examine the internal and external versions of the BS hypothesis using a total of five different measures. Relying on the Cross Sectional-Distributed Lag (CS-DL) approach, we show that the internal version of the BS hypothesis holds only if the labor productivity differential between the tradable and non-tradable sectors is used rather than the Gross Domestic Product Per worker. We also find evidence of a positive and robust effect of the relative price of the non-traded to traded goods on the real exchange rate. Overall, our findings highlight that while the verification of the internal version of the BS effect depends on the proxy considered for productivity, the validity of the external version is a general and robust result.
Classification-JEL
F31, F41
Mot(s) clé(s)
Balassa–Samuelson effect, real exchange rate, relative prices
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2020-19 "Emissions Trading with Transaction Costs"

Marc Baudry, Anouk Faure, Simon Quemin

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Abstract
We develop an equilibrium model of emissions permit trading in the presence of fixed and proportional trading costs in which the permit price and firms’ participation in and extent of trading are endogenously determined. We analyze the sensitivity of the equilibrium to changes in the trading costs and firms’ allocations, and characterize situations where the trading costs alternatively depress or raise permit prices relative to frictionless market conditions. We calibrate our model to annual transaction and compliance data in Phase II of the EU ETS (2008-2012) which we consolidate at the firm level. We find that trading costs in the order of 10 k€ per annum plus 1€ per permit traded substantially reduce discrepancies between observations and theoretical predictions for firms’ behavior (e.g. autarkic compliance). Our simulations suggest that ignoring trading costs leads to an underestimation of the price impacts of supply-curbing policies, this difference varying with the incidence on firms.
Classification-JEL
D22, D23, H32, L22, Q52, Q58
Mot(s) clé(s)
Emissions trading, Transaction costs, Policy design and evaluation, EU ETS
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