Investment and rate of profit in a financial context: The French case

The growth regime which prevailed in France since the middle of the 1980s is characterised by a recovery of profitability without durable resumption of growth or accumulation of productive capital. The financialization of this growth regime can be read in firms' balance sheet structure with rising shares of equities. Following a Post-Keynesian framework, the main determinants of capital accumulation and finance are analysed and tested at the level of non financial companies for France from flow of funds national accounts. The arbitration which seems to prevail between real and financial accumulation could contribute to explain the insufficient recovery of investment. Regarding firms' liability structure, two alternative approaches are considered, one in terms of indebtedness norm, the other in terms of arbitration between financing by debt and issuing shares.Finance; investissement; comportemenet de portefeuille; régime de croissance

Equity and debt in a financialised economy: the French case

While many studies have been devoted to capital accumulation and rate of profit, the article empirically characterises the financialization at the level of firms' liability, i.e. at the level of debt and equity. In particular, the determinants of non financial firms' indebtedness and equity issuing will be analysed econometrically. The theoretical framework is mainly Post-Keynesian, with the founding role played by Minsky (1986) and with Stock Flow Consistent models proposed by Lavoie and Godley (2001), Godley and Lavoie (2007), Taylor (2004) and Dos Santos and Zezza (2008 )with their analysis of interactions between financial variables and investment. The article is based on the flow of funds accounts of INSEE which provide coherent data in flows and stocks over the period 1978-2007. Thanks to a precise account of financial assets and liabilities and capital gains, these data allow to implement a rigorous analysis of firms' financial behaviour at the macroeconomic level.finance; investment; portfolio behaviour; growth regime

Exchange Rate Misalignments at World and European Levels: a FEER Approach

Since the mid-1990s, we observe an increase of world current account imbalances. These imbalances have only been partially reduced since the burst of the crisis in 2007. They reflect, to some extent, exchange rate misalignments, an issue which has been frequently studied in the literature. However, these imbalances, which have reinforced in the 2000s, are also important inside the Euro area. This analysis cannot be reduced to simple estimates of euro misalignment at the world level because of the specific constraints that exist for each member of the Euro area. This article aims to examine to what extent the intra-European imbalances reflect exchange rate misalignments for each "national euro".Equilibrium Exchange Rate; Current Account Balance; Macroeconomic Balance

Interest rates, eurobonds and intra-European exchange rate misalignments: the challenge of sustainable adjustments in the eurozone

The euro zone crisis illustrates the deficiencies of adjustment mechanisms in a monetary union characterized by a large heterogeneity. Exchange rate adjustments being impossible, they are very few alternative mechanisms. At the level of the whole euro zone the euro is close to its equilibrium parity. But the euro is strongly overvalued for Southern European countries, France included, and largely undervalued for Northern European countries, especially Germany. The paper gives a new evaluation of these exchange rate misalignments inside the euro zone, using a FEER approach, and examines the evolution of competitiveness. In a second step, we use a two-country SFC model of a monetary union with endogenous interest rates and eurobonds issuance. Three main results are obtained. Facing a competitiveness loss in southern countries due to exchange rates misalignments, increasing intra-European financing by banks of northern countries or other institutions could contribute to reduce the debt burden and induce a partial recovery but public debt would increase. Implementation of eurobonds as a tool to partly mutualize European sovereign debt would have a rather similar positive impact, but with a public debt limited to 60% of GDP. Furthermore, eurobonds could also be used to finance large European projects which could impulse a stronger recovery in the entire euro zone with stabilized current account imbalances. However, the settlement of a European Debt Agency in charge of the issuance of the eurobonds would face strong political obstacles

On the Determinants of Exchange Rate Misalignments

The literature on exchange rate misalignments is very extensive as well as the literature on exchange rate determinants. To our knowledge, however, no study has analyzed the determinants of exchange rate misalignments. As huge capital inflows have been pouring into emerging countries since the climax of the crisis, exchange rate misalignments are becoming a crucial issue for policy makers. For a large panel of emerging and industrialized countries and on the period 1982-2008, we identify, empirically, the main determinants of exchange rate misalignments obtained thanks to a FEER approach (Williamson, 1994). Our analysis put forward trade openness, financial openness and regional specialization as determinant variables of exchange rate misalignments

Modelling Transition And International Opening In Asia: The Case Of Vietnam With A Comparison With China And The "Asian Tigers"

This paper describes the multisectoral macroeconomic model of a small developing economy in transition, in order to highlight linkages between agriculture and the rest of the economy, and consequences of external opening up. Agriculture is a supply sector, sticky in the short range with market clearing by price adjustment. The non agricultural sector is demand-led, with imperfect competition (and hence sticky prices and indexed nominal wages). According to this dual theoretical pattern, labor market is segmented with an unlimited supply in the rural area. This part of labor force is employed in the agricultural sector and in the rural non agricultural one. Urban workers are employed in the non agricultural sector but may face unemployment. The wage gap between urban and ruralareas induces migration, according to a Harris Todaro mechanism. This framework is applied to the Vietnam case. A calibrated quantitative model performs a base line simulation from 1993 to 2010, following approximately the path designed by the Vietnamese government. Finally, this model is used to sketch various scenarios, among which traditional macroeconomic packages, structural reforms, and external shocks.Vietnam; multisectoral models; development; transition

Slide or growth in Europe? Alternative economic policies and the European social model

Since the mid-1980s, the mismanagement of European economic policy has appeared as one of the main causes of the slow growth. After the brief 1998-2000 recovery, the blocking factors are again fully at play. The EU is all the more up against the wall as

La flexibilité des prix relatifs et la mobilité du travail en Union monétaire

Avec la mise en place de l'euro, les mécanismes d'ajustement au sein de l'Union européenne sont modifiés en profondeur du fait de la disparition du taux de change comme variable d'ajustement. Ceux qui subsistent sont, à titre principal, la flexibilité des salaires et des prix relatifs, la mobilité des facteurs, particulièrement du travail, les politiques budgétaire et monétaire. Ces modes d'ajustement intra-européens constituent un enjeu dont l'importance dépend du caractère asymétrique ou non des chocs et des évolutions structurelles affectant le fonctionnement de l'UE. Le présent article s'intéresse aux mécanismes d'ajustement par le marché du travail à travers deux approches complémentaires. La flexibilité des coûts et des prix relatifs est d'abord analysée à l'aide d'une maquette macroéconomique estimée pour les 14 pays européens. Cette maquette est utilisée pour étudier les conséquences de chocs d'offre ou de demande asymétriques affectant un pays et pour comparer les capacités de réaction des différents pays européens. Ces simulations montrent que la flexibilité des salaires et de l'emploi, et plus généralement la flexibilité des prix relatifs, ne permet qu'un rééquilibrage incomplet et très lent (au-delà de dix ans). Face à un choc négatif sur la demande interne, l'emploi et la production ne retrouvent pas leur niveau initial ou le retrouvent très lentement, et le taux de chômage demeure plus élevé. Le recours à l'instrument budgétaire serait plus approprié. Face à un choc inflationniste et à une perte de compétitivité, la hausse du chômage qui en résulte ne permet qu'un ajustement progressif et incomplet. Les disparités de réaction entre pays face à un choc de même ampleur apparaissent, enfin, non négligeables entre grands et petits pays, notamment en raison des inégalités dans le degré d'ouverture, qui donnent plus de poids aux effets de la compétitivité-prix dans les petits pays, mais aussi entre pays de même taille, du fait des différences structurelles existantes. Ces divergences sont source d'asymétries qui compliquent la conduite de la politique économique dans l'UE, particulièrement en ce qui concerne la politique monétaire commune. La mobilité de la main-d'œuvre est ensuite étudiée avec une modélisation des mouvements migratoires articulée avec un bloc prix-salaires-emploi proche du précédent modèle, appliquée au cas des États-Unis découpés en quatre grandes régions d'une taille voisine de celle des grands pays européens. Les simulations confirment que, comme dans le cas européen, la flexibilité des coûts et des prix relatifs n'autorise que des ajustements limités face à des chocs de demande ou d'offre affectant une région. La mobilité de la main-d'œuvre joue bien un rôle de rééquilibrage, mais celui-ci est d'une ampleur très réduite. Les mouvements migratoires répondent essentiellement à des évolutions structurelles, même aux États-Unis. Des enseignements peuvent en être tirés pour le fonctionnement de l'Union monétaire européenne face à des évolutions asymétriques. La recherche d'une plus grande flexibilité du marché du travail aurait une traduction macroéconomique incertaine et n'aurait qu'une efficacité limitée pour accroître l'ampleur du rééquilibrage par le jeu des prix relatifs. L'espoir également entretenu qu'une plus grande mobilité intra-européenne de la main-d'œuvre pourrait constituer une réponse au moins partielle s'avérerait tout aussi vain.mécanismes d'ajustement; choc asymétrique; modèle macroéconométrique; simulations; salaires; migration;

Temporal Dimension and Equilibrium Exchange Rate: a FEER / BEER Comparison

International audienceWe analyze, in a unified theoretical framework, the two main models for equilibrium exchange rate, namely, the BEER and the FEER approaches. In order to understand the interactions between them, we study in detail the temporal links between these two measures. Our results show that, in average, the BEER and the FEER are closely related. Yet, important differences can be observed for some countries and/or some periods of time. Therefore, we analyze some of the factors that may explain this disconnection, identifying several aspects which are able to alter the relation between the current account and the real effective exchange rate, and so, between the FEER and the BEER. Our analysis puts forward the structural changes in matter of competitiveness, the dynamics of foreign asset positions and valuation effects as explanations for the divergence

Temporal Dimension and Equilibrium Exchange Rate: a FEER / BEER Comparison

We analyze, in a unified theoretical framework, the two main models for equilibrium exchange rate, namely, the BEER and the FEER approaches. In order to understand the interactions between them, we study in detail the temporal links between these two measures. Our results show that, in average, the BEER and the FEER are closely related. Yet, important differences can be observed for some countries and/or some periods of time. Therefore, we analyze some of the factors that may explain this disconnection, identifying several aspects which are able to alter the relation between the current account and the real effective exchange rate, and so, between the FEER and the BEER. Our analysis puts forward the structural changes in matter of competitiveness, the dynamics of foreign asset positions and valuation effects as explanations for the divergence.Equilibrium Exchange Rate, BEER, FEER, Cointegration, Global Imbalances