No Double Standards: Quantifying the Impact of Standard Harmonization on Trade [link]
Journal of International Economics, 2022, vol. 137.
This paper quantifies a novel channel that contributes to greater trade integration: the release of harmonized, voluntary product standards. Standards define product characteristics that ensure compatibility, quality and consistency. Harmonized standards unify these characteristics across countries and reduce country-specific adaption costs. We create a novel database on cross-country standards and show that harmonized standards have contributed up to 13\% of the growth in global trade. We build a heterogeneous firm model where harmonized standards generate scale effects and induce firms to adopt the standard. Firm-level evidence shows that only the largest firms in the top range of the size-distribution increase their export sales. These firms benefit from higher demand, charge higher prices and sell larger volumes.
International Spillovers of Monetary Policy: Evidence from France and Italy [link]
Journal of International Money and Finance, 2018, vol. 89, p. 50-66.
In this paper we provide empirical evidence on the impact of US and UK monetary policy changes on credit supply of banks operating in Italy and France over the period 2000--2015, exploring the existence of an international bank lending channel. Exploiting bank balance sheet heterogeneity, we find that monetary policy tightening abroad leads to a reduction of credit supply at home, in particular for US monetary policy changes. Our results show that USD funding plays an important role in the transmission mechanism, especially for French banks which rely to a larger extent on USD funding. We also show that banks adjust their euro and foreign currency lending differently, thus implying that funding sources in different currencies are not perfect substitutes. This is especially the case when tensions in currency swap markets are high, thus resulting in costly cross-currency funding.
International Banking and Cross-Border Effects of Regulation: Lessons from France [link]
International Journal of Central Banking, 2017, vol. 13(2), p. 163-193.
As part of the International Banking Research Network, the Banque de France contribution to the research project on prudential policy spillovers concentrates on the “outward” adjustment of French banks’ cross-border lending. We consider both adjustment of cross-border lending to foreign (“destination-country”) and French (“home-country”) regulation and investigate differences between financial and non-financial counterparties. For some regulatory measures, we find that French banks increase their cross-border lending growth in response to regulatory tightening abroad—presumably because they are not subject to these regulatory changes. All in all, we do not find particularly large quantitative adjustments to changes in foreign regulatory policies. Lastly, we find that balance sheet variables are important for the adjustment of crossborder lending growth in response to French regulatory policy changes.
International Banking and Liquidity Risk Transmission: Evidence from France [link]IMF Economic Review, 2015, vol. 63(3), p. 479-495.
The Banque de France contribution analyzes the effect of liquidity risk on domestic and foreign lending, credit and intragroup funding by French banking groups. The paper finds that a higher core deposit ratio, a higher commitment ratio, and a low ratio of illiquid assets are associated with higher growth of certain types of lending during times of liquidity risk. These effects are mitigated when public liquidity is accessed, thus confirming that public liquidity provision was conducive to maintaining lending growth. Most importantly, it finds that the quantitative importance of liquidity risk is more pronounced for foreign lending, which may suggest that the particular banking model of French banks and the strong domestic retail sector contributed to the stability of domestic credit.
Patents that Match your Standards: Firm-level Evidence on Competition and Innovation [pdf]
Banque de France Working Paper No. 876
CEPR Discussion Paper No. 17486
When a technology becomes the new standard, the firms that are leaders in producing this technology have a competitive advantage. Matching the semantic content of patents to standards and exploiting the exogenous timing of standardization, we show that firms closer to the new technological frontier increase their market share and sales. In addition, if they operate in a very competitive market, these firms also increase their R&D expenses and investment. Yet, these effects are temporary since standardization creates a common technological basis for everyone which allows followers to catch up and the economy to grow.
Technological Standardization, Endogenous Productivity and Transitory Dynamics [pdf]
Banque de France Working Paper No. 503
Technological standardization is an essential prerequisite for the implementation of new technologies: The interdependencies of these technologies require common rules ("standardization") to ensure compatibility. Though standardization is omnipresent in industrialized economies, its macroeconomic implications have not been analyzed so far. Using data on standardization, we are able to measure the macroeconomic effects of the adoption of new technologies. First, our results show that new technologies diffuse slowly. Total factor productivity decreases temporarily, implying that the newly adopted technology is incompatible with the incumbent technology. Second, standardization reveals information about future productivity as evidenced by the positive and immediate reaction of stock market variables.
Constructing a Concordance Table between HS and ICS [pdf]
This paper describes a keyword matching procedure to create a concordance table between the 4-digit Harmonized System (HS) and the 5-digit International Classification for Standards (ICS) system. We compare our results to the concordance table between HS and ICS from the World Trade Organization (WTO). The WTO concordance table is based on member notifications of non-tariff measures (NTM).
Country Risk Premia, Endogenous Collateral Constraints and Non-linearities: A Threshold VAR
The notion of occasionally binding constraints has been used in macroeconomic models to generate amplified financial accelerator effects - in particular for emerging market business cycles. As much as these models have to use global solution techniques, empirical models have to resort to non-linear estimation techniques to capture asymmetries. Using a threshold vector autoregression approach, I analyze the effect of shocks to the country risk premium in different regimes which are interpreted as states of the economy where collateral constraints bind to a different degree. Amplification coefficients measuring the non-linearity of responses are computed across various emerging market economies. First, the results show that there is large heterogeneity in the responses and the size of amplification coefficients. Second, these cross-country differences can be associated with characteristics such as liability dollarization or external leverage. This validates the underlying conceptual framework where vulnerability at the country level is assumed to depend on the degree of financial frictions. Third, this paper shows that both a debt-deflation mechanism which causes asset price spirals as well as pecuniary externalities stemming from exchange rate depreciation can lead to non-linearities; however, the former is associated with a higher likelihood of leading to regime switches.
International Funding Diversification and Bank Resilience – Evidence from UK Banks
The recent financial crisis has demonstrated the strong cross-border linkages that led to an unprecedented freeze in bank funding markets. This paper considers whether greater diversification of foreign funding across countries can make banks more resilient against adverse shocks. To date, most studies of banks' concentration risks during the crisis have focused on the asset side of their balance sheet. In this paper, we build a model of heterogeneous banks that are constrained in their ability to diversify away certain funding risks due to fixed costs. There is a trade-off between a high degree of diversification and the costs that such diversification entails. Heterogeneity in bank size and profitability translates into different relative fixed costs. Using detailed balance sheet data for all UK-resident banks, we show that banks' ability to weather the rise in funding costs during times of financial stress is related to their size and profitability. Conditional on banks' reliance on domestic core deposit funding, better diversified foreign funding mitigates the impact of a global shock. We specifically take into account the different dimensions of diversification. Along the extensive margin, banks are more resilient against shocks if they fund from a larger number of foreign sources. With regards to the intensive margin, an analysis of the specific correlation patterns of different funding sources is desirable as simple measures of concentration risk fall short of capturing the high degree of interconnectedness that characterizes foreign funding markets.
Work in progress
Safe Asset Demand and the Maturity Structure of Sovereign Debt
Monetary Policy Transmission Through Foreign Asset Holdings
The implications of globalisation for the ECB monetary policy strategy [link]
ECB Occasional Paper, no. 263, September 2021.
Euro area portfolio flows in 2020: the impact of the Covid-19 crisis [link]
Blog Banque de France, June 2021.
Global Policy Responses to Capital Flow Volatility [link]
IMF Blog, December 2020.
When the ECB lends in US dollars: Central Bank swaps during COVID 19 [link]Blog Banque de France, July 2020.
The trade-enhancing impact of product standard harmonization [link]Banque de France Bulletin, no. 228, April 2020.
Global imbalances: build-up, unwinding and financial aspects [link]
Banque de France Bulletin, no. 220, November 2018.
Obstacles to trade: tariffs are not everything [link]Blog Banque de France, July 2018.
External wealth (or debt) as drivers of the current account [link]Blog Banque de France, May 2018.
International financial flows in the New Normal: key patterns (and why we should care) [link]
CEPII Policy Brief, no.10, March 2016.
The transmission of liquidity risk through international banks [link]
Rue de la Banque, no. 18, February 2016.