Fabien Labondance

Financial stability and economic performance

This paper aims at establishing the link between economic performance and financial stability in the European Union. We use the seminal framework of Beck and Levine (2004) – both in terms of variables and econometric method – to estimate this causal relationship, independently from but controlling for the level of financial depth. Using a panel GMM with instrumental variables, our contribution involves testing how different measures of financial instability (an institutional index, microeconomic indicators, and our own statistical index derived from a principal component analysis) affect economic performance (or components of aggregate dynamics like consumption, investment and disposable income). We find that financial instability has a negative effect on economic growth.

Assessing the Link between Price and Financial Stability

This paper aims at investigating first the (possibly time-varying) empirical relationship between the level and conditional variances of price and financial stability, and second, the effects of macro and policy variables on this relationship in the United States and the Eurozone. Three empirical methods are used to examine the relevance of A.J Schwartz’s conventional wisdom that price stability would yield financial stability. Using simple correlations, VAR and Dynamic Conditional Correlations, we reject the hypothesis that price stability is positively correlated to financial stability. We then discuss the empirical appropriateness of the leaning against the wind monetary policy approach.

Financial Stability and Economic Performance

This paper aims at establishing the link between economic performance, financial depth and financial stability in the European Union from 1998 to 2011. We use the standard framework - both in terms of variables and econometric method - of Beck and Levine (2004) to estimate these relationships. Our results suggest that the traditional result that financial depth positively influences economic performance (or components of aggregate dynamics like consumption, investment or disposable income) is not confirmed for European countries. Furthermore, we use different measures of financial instability (institutional index, microeconomic indicators, and our own statistical index derived from a Principal Component Analysis) and find that financial instability has a negative effect on economic growth.

Financial Systems in Financial Crisis – An Analysis of Banking Systems in the EU

The goal of this paper is twofold. First, we describe briefly the French banking sector, presenting its main development since the 1980s and its key characteristics. Second, we analyse the consequences of the financial crisis on the French economy and its banks. In particular, we emphasise the resilience of the French banking model, as no major bankruptcy has occurred in the banking sector since 2008 and private agents have continued to finance their activity without intense credit rationing. However, concerns over the soundness of the French financial system remain unaddressed.

Euro Area Inflation and ECB Policy in a Global Environment

This paper contributes to the literature investigating the role of global factors in determining Euro area inflation, using a wide list of potential candidates to measure global factors. We show that roughly 50 percent of inflation is explained by global factors; and that the ECB has an impact on the domestic part of inflation. This calls for adjusting the definition of the ECB target to the domestic-driven indicator of inflation which we develop.