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France in the global economy: a structural approximate dynamic factor model analysis

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  • Alain Kabundi
  • Francisco Nadal De Simone

Abstract

This study identifies the main shocks that cause fluctuations in French output and their channels of transmission. It uses a large-dimensional structural approximate dynamic factor model. There are three main findings. First, common shocks, especially demand shocks, which seem to originate from the U.S., play an important role in explaining French economic activity. While international trade, relative prices, and FDI flows are the main channels of transmission, the stock market, consumer confidence, and interest rates also matter. Second, France's integration with the rest of the world has increased over time. Third, there is some tentative evidence of regional components in explaining French output fluctuations; countryspecific components also contribute. The predominance of exogenous factors affecting French output, the asymmetry in the transmission of shocks, and France's participation in a currency area, argue for making French goods, services, and labor markets as flexible as possible.
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  • Alain Kabundi & Francisco Nadal De Simone, 2011. "France in the global economy: a structural approximate dynamic factor model analysis," Empirical Economics, Springer, vol. 41(2), pages 311-342, October.
  • Handle: RePEc:spr:empeco:v:41:y:2011:i:2:p:311-342
    DOI: 10.1007/s00181-010-0383-6
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    Cited by:

    1. Ms. Natalia T. Tamirisa & Alain N. Kabundi & Ms. Deniz O Igan & Mr. Francisco d Nadal De Simone & Marcelo Pinheiro, 2009. "Three Cycles: Housing, Credit, and Real Activity," IMF Working Papers 2009/231, International Monetary Fund.
    2. Kabundi, Alain & Nadal De Simone, Francisco, 2012. "Recent French relative export performance: Is there a competitiveness problem?," Economic Modelling, Elsevier, vol. 29(4), pages 1408-1435.
    3. James N. Blignaut & Jan H. van Heerden, 2015. "Is Water Shedding Next?," Working Papers 50, Economic Research Southern Africa.
    4. Xisong Jin & Francisco Nadal De Simone, 2015. "Investment funds? vulnerabilities: A tail-risk dynamic CIMDO approach," BCL working papers 95, Central Bank of Luxembourg.
    5. Jin, Xisong & Nadal De Simone, Francisco, 2014. "A framework for tracking changes in the intensity of investment funds' systemic risk," Journal of Empirical Finance, Elsevier, vol. 29(C), pages 343-368.
    6. Mustafa Çakir & Alain Kabundi, 2017. "Transmission of China's Shocks to the BRIS Countries," South African Journal of Economics, Economic Society of South Africa, vol. 85(3), pages 430-454, September.
    7. Alain Kabundi, 2009. "Synchronisation Between South Africa And The U.S.: A Structural Dynamic Factor Analysis," South African Journal of Economics, Economic Society of South Africa, vol. 77(1), pages 1-27, March.
    8. Igan, Deniz & Kabundi, Alain & Nadal De Simone, Francisco & Pinheiro, Marcelo & Tamirisa, Natalia, 2011. "Housing, credit, and real activity cycles: Characteristics and comovement," Journal of Housing Economics, Elsevier, vol. 20(3), pages 210-231, September.

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    More about this item

    Keywords

    Dynamic factor models; International business cycles; Sign restrictions; C3; E32; F00; E5;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F00 - International Economics - - General - - - General
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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