Vol. 5 No. 1 (2020)
La Revue Internationale des Économistes de Langue Française
Published:
30-06-2020
Articles
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The ECB in the Adventure of Negative Rates: The NIRP
The ECB was the first of the G4 central banks to bring its interest rate into negative territory (NIRP, Negative Interest Rate Policy) in June 2014. In the arsenal used by the ECB, it is undoubtedly the most controversial. The aim of the article is to give an overview of this experience. He underlines that the adoption of the NIRP marks, in late 2014 - early 2015, the transition of ECB action to a truly unconventional monetary policy. It is part of the adoption of a new, much more radical, monetary easing strategy, in which the NIRP composes, with forward-looking guidance and an asset purchase program, a triptych intended to fight against triggering a deflationary spiral and bringing inflation close to the target set by the ECB. Its transmission mechanisms and expected effects are then presented along with the main lessons from NIRP previous experiences in Sweden and Denmark. Afterwards, a progress report is proposed, with regard to the objective pursued, where the controversy surrounding its effects is exposed, by questioning in particular its consequences for the situation of the banking system in the euro zone. Finally, the main lessons from this real adventure in unknown lands are learned and the difficulties encountered in leaving the NIRP mentioned.(original abstract)
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Teaching New Open Macroeconomics with a Simple "Toy Model"
This article introduces a static model of the New International Macroeconomics to address issues of monetary policy implementation in the open economy. This framework makes it possible to address in a simple fashion standard questions of open macroeconomics such as the effectiveness of economic policy according to the exchange rate. It is extended to analyze dirty floating regimes and the reasons that may justify the lack of coordination of monetary policies in a world characterized by strong commercial and financial spillovers.(original abstract)
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Fiscal Consolidation : what Differences between Shock Therapy and Soft Adjustment?
After easing fiscal policies during the economic crisis, many countries faced a rising public debt and most of them have launched fiscal consolidation plans to stabilize and reduce the public indebtedness in order to restore the sustainability of the public finances. Two different strategies can be followed by policymakers to achieve this goal. The first approach is a shock therapy that would response to a financial emergency keeping away a potential default. A second approach smoothes the fiscal adjustment to limit contractionary effects. In this paper, we compare the macroeconomic effects of each strategy based on the narrative approach of the fiscal consolidations developed by the IMF rather than the conventional statistical measure (cyclically-adjusted primary balance: CAPB) measure. Both strategies show similar effects on the macroeconomic variables, but private demand would react stronger to the shock therapy strategy.(original abstract)
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Heterogeneity of the Okun's Law Coefficients across Developed Countries : Empirical Evidence on Nonlinear Influence of the Technological Gap
The magnitude of short run variations in unemployment induced by output shocks is influenced, interalia, by a variety of supply-side characteristics of the economy in question. This paper argues that one important element of those characteristics is a country ' s 'distance ' from the technological frontier. Using both, a panel interaction model and a panel threshold model, we show that the value of the coefficient linking short run variations in unemployment to output changes (often known as the Okun ' s Law Coefficient) is influenced by the technological distance of a country to the world efficiency frontier. Specifically, the larger the distance to the frontier, the larger the impact of real GDP movements on unemployment rate variations. Moreover, the magnitude of this impact is both considerable and exhibits wide variation between countries; decomposition of the total derivatives of unemployment with respect to GDP shows that the technology-induced share of this derivative is around 20% for Norway and Denmark countries (close to the frontier) and around 40% for Greece (which has the largest technological gap). Traditional growth enhancing demand side policies should thus go in hand with adequate supply side policies in order to stabilise or reduce the unemployment rate in technologically advanced countries.(original abstract)
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Leverage Ratio Restrictions : an Empirical Evaluation of their Pros and Cons
Given recent regulatory changes under Basel III, we empirically examine the impact of leverage ratio and risk-based capital requirements on bank risk taking and lending, allowing for different degrees of supervisory strength. Using data for 66 countries covering the period 2000-2014, we find that banks in countries with a leverage ratio restriction grant fewer loans and have higher credit risk compared to banks facing no leverage ratio requirement, independently of the strength of the supervisory regime. We further find that those negative side-effects of leverage ratio requirements on bank lending and credit risk are not offset by higher capital stringency.(original abstract)
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The Invention of Shadow Banking
The spectacular rise of non-banking intermediation has led to a vast literature devoted to the analysis of the shadow banking phenomenon, considered to be the main reason for the banking and financial debacle of the great crisis of 2007-2008. The aim of this article is to present the roots of this phenomenon, as an essential prerequisite in order to establish its role in credit funding. In the light of an analysis of the tools of modern finance, this article offers a thought that gradually raises questions about the tilting of the financial system towards an intensive collateralization process.(original abstract)
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Energy Poverty in Europe : Is there a Kuznets Relationship?
The phenomenon of fuel poverty is a problem recently identified in Europe and in particular in Southern and Eastern European countries. This paper investigates fuel poverty as an expression of environmental inequalities. It tests the existence of a Kuznets curve between fuel poverty and GDP per capita in Europe. The study covers 28 European countries from 2004 to 2017 using aggregated data from Eurostat ' s EU-SILC survey. To proxy the level of fuel poverty 2 indicators are alternatively tested, the percentage of individual unable to keep home adequately warm and a composite indicator. The results show the existence of a non-linear U-shaped relationship between fuel poverty and per capita income and not inverted U-shape as in the Kuznets relation. In Europe, economic development has been an important factor in reducing energy poverty, but a per capita income threshold exists after which economic growth no longer reduces fuel poverty. In conclusion, more future growth will not systematically induce less fuel poverty, measures on energy efficiency and / or measures to increase the purchasing power of households must be developed especially at the national level to target the most vulnerable households.(original abstract)
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How to Save Water in Agriculture?
Agricultural use of water, accounting for 70% of water use worldwide, both contributes and is confronted to water scarcity. This problem becomes more urgent as world ' s population continues to grow and climate change is accelerating. Improving the efficiency of water use is usually presented as an opportunity for large water savings in the agricultural sector. However, recent literature has pointed out that the introduction of more efficiency irrigation systems may actually increase water catchment depletion. This is explained by the so-called rebound effect or Jevons paradox, a phenomenon widely study in the energy sector. The price reduction following the efficiency improvement leads to an increase in water use which ends up eroding, completely or partially, the savings expected from the new technology. In this paper, we present a theoretical framework to analyze farmers' incentives to save water after an improvement of the irrigation efficiency. Moreover, we study the variability of irrigation demand following an energy price shock. Our findings suggest that incentive to water saving are determine by the underlying energy context.(original abstract)
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Education, Taxation and Income Inequality: what Choices by the Median Voter?
This study is following Meltzer and Richard (1981) on the link between inequality and redistribution studied within the median voter model. We propose an original theoretical framework with heterogeneous choices of qualification by active voters, following the idea put forward by Razin et alii (2002, 2004). We first show how the choice of qualification by the decisive voter directly influences his preferences in terms of income taxation, and vice versa. While a decrease in education costs increases the share of the educated population, its effect on redistribution is contrasted. Economies with similar education costs may choose high or low redistribution rates, despite high inequality. This partly invalidates Meltzer and Richard's result.(original abstract)
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'Hybrid ' Competition, Innovation Outcomes and Regulation: a Duopoly Model
This paper presents a duopoly model in which a commercial organization and a community compete by providing digital products while being able to share their innovation outputs to develop their own activities. The commercial organization always benefits from either a 'closed ' or an 'open ' institutional regime shift. Our numerical analysis evidences that the 'closed ' shift provides the best levels of innovation and welfare whereas it is not found to be profit-improving when product differentiation is small. This result partially qualifies the conventional idea according to which public policies may be designed to defend commercial interests rather than public ones.(original abstract)
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Network Dynamics : Heterogeneity, Rationality and Inertia
Revisiting the work of Farrell and Saloner (1985, 1986) on the processes of technological adoption or choice of standard, this article analyzes the problems related to the timing of decisions and deepens the study of the inertia effect in these situations. We focus our analysis on the interaction of network effects and informational externalities to show that the information revelation, through its backward and forward effects, can in some cases eliminate inefficient inertia while all the literature on networks has mostly focused on the bandwagon effects systematically giving rise to momentum behaviors or more oftenly excessive inertia. In an incomplete information framework on agent preferences, we add to our model the possibility of a transitional incompatibility situation as well as any switching cost situation in such a way as to examine without bias and completely the impact of the dissemination of information on the adoption decisions of agents. Finally, some of our results on equilibrium strategies and optimality can be reinterpreted from the point of view of the heterogeneity of the population, in terms of preferences or ability to process information. Some types of agents that do not react to their environment will lead to a bias in the decisions of sophisticated agents and influence in a « disproportionate » way the result and the optimality of the game.(original abstract)
