Short-Run Assessment of French Economic Activity Using OPTIM.

This paper describes a short-term projection model for French economic activity, OPTIM, the aim of which is twofold. First it gives an early estimate of real GDP growth for the previous quarter, when no figure has yet been released by Insee, the French National Statistical Institute, along with flash estimates for main GDP components (consumption, investment, inventories and external trade) together with a breakdown by sectors (services, manufacturing, construction, equipment, agri-food). This appears particularly useful for the short-run analysis. In this respect OPTIM may be considered as a traditional bridge equation model since it links a particular indicator available generally ahead of the release of the quarterly national accounts with a quarterly aggregate like GDP, consumption…. Second, this tool supplies also estimates for GDP growth and its main components for the current quarter and for the next quarter (i.e two and three quarters respectively following the latest reference period of Insee's GDP data release). A pool of (mainly) monthly variables is used, which are, sometimes, directly introduced in the specification but, more often, summarised by the implementation of a principal component analysis (PCA). The largest part of the set of indicators comprises survey data together with monthly traditional indicators (industrial production, consumption in manufactured goods…). But other data (in particular financial data) are also introduced. The outcomes of OPTIM rely on a relatively complex procedure involving about twenty equations and mixing two alternative approaches: a supply approach consisting in a direct modelling of GDP and a demand approach where GDP is the sum of consumption, investment, changes in stocks and net trade (exports minus imports). The discrepancy between these two estimates is distributed according to an original method, yielding a unique GDP estimation. The paper is organised as follows. Section 1 presents the main features of OPTIM. Section 2 deals with data description while section 3 addresses the data assessment's issue. In section 4, the main equations are described. Section 5 presents a general assessment of OPTIM in terms of forecasting record. Finally section 6 concludes and proposes some avenues for further developments.

Innovation and Advertising: Theory and Evidence.

Advertising and innovation are two engines for firms to escape competition through a better attraction power toward consumers or quality advantage. We propose a model that encompasses both the static and dynamic interactions between R&D, advertising and competitive environment. This model provides two main predictions. First, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D. Second, more competition pushes Neck and Neck firms to advertise more to attract a larger share of consumers on their products or services. Empirical evidence from a large panel of 59,000 French firms over 1990-2004 supports these two properties.Advertising, Innovation, Competition, Lerner.

Competition, R&D, and the Cost of Innovation.

This paper proposes a model in the spirit of Aghion et al. (2005) that encompasses the magnitude of the impact of competition on R&D according to the cost of the innovation. The effect of competition on R&D is an inverted U-shape. However, the shape is flatter and competition policy is therefore less relevant for innovation when innovations are relatively costly. Intuitively, if innovations are costly for a firm, competitive shocks have to be significant to alter its innovation decisions. Empirical investigations using a unique panel dataset from the Banque de France show that an inverted U-shaped relationship can be clearly evidenced for the largest firms, but the curve becomes flatter when the relative cost of R&D increases. For large costs, the relationship even vanishes. Consequently, in sectors in which innovations are costly, policy changes have to be on a very large scale for an impact to be expected; at the extreme end, in certain sectors, the curve is so at that competition policy is not an appropriate tool for boosting the research effort of firms.Competition ; R&D ; Innovation.

Access to new imported varieties and total factor productivity: Firm level evidence from France.

This paper aims at providing causal evidence on the effects of expanded imported varieties on total factor productivity (TFP) using French firm level data. Our strategy is to build an exact index of increase in varieties -using the Broda, Greenfield and Weinstein (2006) methodology. This index captures the impact of new varieties on total factor productivity within a Dixit-Stiglitz framework based on a Constant Elasticity of Substitution production function. We argue that measurement problems are central to the question we try to address. We deal with this issue using alternative instrumental variables strategies. First, we work with sectoral variety index in order to reduce the effect of outliers. Secondly, working with estimated bilateral imports rather than observed ones, we are able to adjust the variety index for measurement errors and find a strong impact of this index on TFP. New varieties that enter the production function appear as weakly substitutable- with an elasticity of substitution ranging from 1.25 and 1.5 - and conducive to significant TFP growth.Variety ; Trade ; Total Factor Productivity.

Estimation of a Time Varying NAIRU for France.

Among several concepts encompassed by the idea of an equilibrium rate of unemployment (labour mismatch, unemployment trend, non inflationary unemployment, structural unemployment), the NAIRU appears as the most interesting one for a central bank since it focuses directly on inflation. Thus, the paper considers the reduced Phillips equation, assuming a stable relationship between inflation and some kind of demand disequilibrium index, as the most promising starting point to estimate an equilibrium rate of unemployment.Inflation ; NAIRU ;: France ; Kalman filter

Total factor productivity and the decision to serve foreign markets: Firm level evidence from France.

This paper examines productivity differences between firms doing foreign direct investment (FDI) and domestic firms on a sample of 28,133 continuing French firms over the period 1996-2002. The main contribution of this paper is to scrutinize the links between the different modes of globalization (exporting vs. setting up an affiliate overseas) and address the question of causality between productivity and global expansion. Comparing domestic firms and extra-firm exporters of goods, we find that pre-entry selection is more important than post-market-entry effects. Pre-entry boosts to productiVity are interpreted as a reflection of sunk cost to exporting in our framework while the absence of post-entry productivity effects is interpreted as an absence of learning effects associated with exporting. This result does not seem to fully hold for exports of services, which we consider as a partial evidence of foreign knowledge spillovers at work in the exports of services; more in-depth investigation would be probably fruitful to identify the dynamics of the diffusion process.International Trade ; productivity ; Learning ; Spillover ; Self-selection.

Contribution des PME à la croissance – Revue de la littérature.

Les PME contribuent fortement à l’amélioration de la compétitivité, du dynamisme de l’innovation et de la croissance d’une économie ; cette revue de la littérature met en perspective les déterminants de leur développement et de leur cycle de vie.PME, taille de l’entreprise, concentration, entrée-sortie.

Invariance quantum groups of the deformed oscillator algebra

A differential calculus is set up on a deformation of the oscillator algebra. It is uniquely determined by the requirement of invariance under a seven-dimensional quantum group. The quantum space and its associated differential calculus are also shown to be invariant under a nine generator quantum group containing the previous one.Comment: 13 pages, Late

The determinants of intrafirm trade: Evidence from French firms

How well does the theory of the firm explain the choice between intrafirm and arms' length trade? This paper uses firm-level import data from France to look into this question. We find support for three key predictions of property-rights theories of the multinational firm. Intrafirm imports are more likely: (i) in capital- and skill-intensive firms; (ii) in highly productive firms; (iii) from countries with well-functioning judicial institutions. We further bridge previous aggregate findings with our investigation by decomposing intrafirm imports into an extensive and intensive margin. Doing so we uncover interesting patterns in the data that require further theoretical investigation.intrafirm trade; outsourcing; firm heterogeneity; incomplete contracts; internationalization strategies; quality of institutions, extensive margin, intensive margin.

Financial Constraints and Foreign Market Entries or Exits: Firm-Level Evidence from France

This paper studies the effect of credit constraints on the expansion and survival of firms in foreign markets. It develops a model in which, lower access to external finance, or reduced internal liquidity, hampers the firm ability to finance the recurrent costs to serve foreign markets and decreases firm survival in foreign markets. Additionally, financial constraints act as a barrier to firm export expansion by decreasing the firm ability to finance the entry costs into new export markets; thus, they push firm to avoid losing destinations. We use a unique longitudinal dataset on French firms that contains information on export destinations of individual firms and allows us to construct various firm-level measures of financial constraints to test these predictions. We obtain two main results. First, credit constraints have a negative effect on the number of newly served destinations. Second, higher probability of exit from the export market is also associated with credit constraints; that is consistent with constraints limiting the financing of recurrent export costs.Firm heterogeneity, financial constraints, trade.