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The FR-BDF Model and an Assessment of Monetary Policy Transmission in France, Working Paper Series no. 736, Banque de France

Author

Listed:
  • Matthieu Lemoine

    (Centre de recherche de la Banque de France - Banque de France)

  • Harri Turunen

    (Centre de recherche de la Banque de France - Banque de France)

  • Mohammed Chahad

    (Centre de recherche de la Banque de France - Banque de France)

  • Antoine Lepetit

    (Centre de recherche de la Banque de France - Banque de France)

  • Anastasia Zhutova

    (Centre de recherche de la Banque de France - Banque de France)

  • Pierre Aldama

    (Centre de recherche de la Banque de France - Banque de France)

  • Pierrick Clerc

    (Centre de recherche de la Banque de France - Banque de France)

  • Jean-Pierre Laffargue

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper presents the new model for France of the Banque de France (FR-BDF), as well as its key implications for the analysis of monetary policy transmission in France. Relative to our former model, this new semi-structural model has been improved along three dimensions: financial channels are richer, expectations now have an explicit role and simulations now converge toward a balanced growth path. We follow the approach of the FRB/US model, where agents can form their expectations in two different ways, VARbased or model-consistent, and where non-financial behavior react with polynomial adjustment costs. For standard monetary policy shocks, FR-BDF shows a stronger sensitivity than our former model, due to the widespread influence of expectations. Then, we show that, under model-consistent expectations, FR-BDF does not suffer from the forward guidance puzzle. Finally, Eurosystem asset purchase programmes have notable effects in FR-BDF, with a stronger transmission through exchange rates than term premia.

Suggested Citation

  • Matthieu Lemoine & Harri Turunen & Mohammed Chahad & Antoine Lepetit & Anastasia Zhutova & Pierre Aldama & Pierrick Clerc & Jean-Pierre Laffargue, 2019. "The FR-BDF Model and an Assessment of Monetary Policy Transmission in France, Working Paper Series no. 736, Banque de France," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-02400611, HAL.
    • Handle: RePEc:hal:cesptp:hal-02400611
    Note: View the original document on HAL open archive server: https://hal.science/hal-02400611
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    Cited by:

    1. Scobie, Grant M, 2020. "If Bill Phillips were Governor ...? Some implications of his work for contemporary macroeconomic policy," Working Paper Series 21096, Victoria University of Wellington, Chair in Public Finance.
    2. Bańkowski, Krzysztof, 2023. "Fiscal policy in the semi-structural model ECB-BASE," Working Paper Series 2802, European Central Bank.
    3. Bove Guillaume & Dees Stéphane & Thubin Camille, 2020. "House Prices, Mortgage Debt Dynamics and Economic Fluctuations in France: A Semi-Structural Approach," Working papers 787, Banque de France.
    4. Pierre Aldama & Jean-François Ouvrard, 2020. "Basic Model Elasticities of the Macroeconomic Model for France of the Banque de France (FR-BDF)," Working papers 750, Banque de France.
    5. Darracq Pariès, Matthieu & Notarpietro, Alessandro & Kilponen, Juha & Papadopoulou, Niki & Zimic, Srečko & Aldama, Pierre & Langenus, Geert & Alvarez, Luis Julian & Lemoine, Matthieu & Angelini, Elena, 2021. "Review of macroeconomic modelling in the Eurosystem: current practices and scope for improvement," Occasional Paper Series 267, European Central Bank.

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    Keywords

    forward guidance; monetary policy; expectations; semi-structural modeling;
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