An Update of FR-BDF Basic Model Elasticities and the FR-BMEs Model: A Simplified Forecasting Platform for Banque de France Macroeconomic Interim Projections

This paper has two objectives. First, it updates the set of Basic Model Elasticities (BMEs) of the Banque de France's semi-structural macroeconomic model for France (FR-BDF), initially presented in 2020. Since then, FR-BDF has been enhanced with detailed blocks for household credit and housing markets, corporate financing, and fully re-estimated following the release of national accounts in base 2020. The BMEs reported here reflect these improvements and remain constructed under an orthogonality principle, providing analytical responses to isolated shocks that can be combined to design alternative scenarios. Second, the paper introduces FR-BMEs, a simplified, linearized model based on FR-BDF BMEs, which has been used since March 2024 for interim projections. While this approach improves efficiency, it reduces the granularity of projections, notably for public finances and household income. FR-BMEs also supports policy analysis, including model-based forecast-error decomposition. We illustrate this with a post-mortem of the 2024 GDP growth forecast error from the December 2023 Banque de France's projection. Actual growth reached 1.1 % versus a forecast of 0.9 %, implying a +0.2pp error. This discrepancy mainly reflects historical data revisions (+0.16pp) and, to a lesser extent, changes in Eurosystem assumptions (+0.05pp). By coincidence, revisions in public finance assumptions (+0.28 pp) and errors in expert judgement (- 0.28pp) offset each other.