FFJ-BANQUE DE FRANCE WORKSHOP

Macroeconomics
and Monetary Policy
24 June 2020 | 10:30-15:10
Banque de France, Virtual Room
Mandatory registration ffj@ehess.fr
Subject to availability

Over the last 20 years, there have been significant changes in the environment of the macroeconomy, particularly
monetary policy. The Bank of Japan established the quantitative easing policy in March 2001 as a pioneer ofso-called “unconventional monetary policies (UMPs).” After the global financial crisis hit the economy in 2008,
many major central banks also started UMPs, such as large-scale asset purchases and negative interestrates. One obvious question regarding UMPs is their effects on the macroeconomy and financial markets
domestically and internationally. There are also intensive studies on other issues in macroeconomics, such as
fiscal and exchange rate policies and innovation and new technology. In this workshop, the researchers from
France, Japan, and other countries discuss those issues in macroeconomics and monetary policy.
This workshop is organized in collaboration with FFJ and the Banque de France by Tatsuyoshi Okimoto (2019FFJ/Banque de France Fellow, Australian National University) and Urszula Szczerbowicz (Banque de France).

Programme
10:30 | Welcome Remark

Sébastien Lechevalier (EHESS-FFJ)

10:40 | Session 1: International Policy Issues
Chair Urszula Szczerbowicz (Banque de France)

International spillover effects of unconventional monetary policies ofmajor central banks
Tomoo Inoue (Seikei University) and Tatsuyoshi Okimoto (EHESS-FFJ and Australian NationalUniversity)

Firm turnover in the export market and the case for ﬁxed exchange rate
regimeMasashige Hamano (Waseda University) and Francesco Pappadà (Paris School of Economics)

How Policies are perceived in the market for the Japanese government
bonds: Evidence from volatility smiles
Etsuro Shioji (Hitotsubashi University)

12:10 | Lunch
13:30 | Session 2: Macroeconomic Issues
Chair Caroline Jardet (Banque de France)

Patents that match your standards: Insights from linking patents andstandards
Antonin Bergeaud (Banque de France) and Julia Schmidt (Banque de France)

Wealth concentration and speculative bubbles
Tomohiro Hirano (Royal Holloway, Univ. of London), Jose Scheinkman (Columbia University), and Makoto
Nirei (Tokyo University)

Business cycle dynamics after the Great Recession: An extended
Markov-Switching dynamic factor model
Catherine Doz (University Paris 1 Panthéon-Sorbonne), Laurent Ferrara (SKEMA Business School), andPierre-Alain Pionnier (OECD)

15:00 | Concluding Remarks

Sophie Haincourt (Banque de France)

15:10 | AdjournSpeakers
Laurent Ferrara (SKEMA Business School)
Laurent Ferrara is full Professor of International Economics at the SKEMA Business
School since September 2019. He was previously Head of the International
Macroeconomics Division at the Banque de France in Paris, in charge of the global
macroeconomic outlook as well as global policy issues such as exchange rates,
commodities or global imbalances. He is also giving lectures at the Paris School ofEconomics and at the University of Paris Nanterre where he is associated researcher
at EconomiX, a CNRS research unit. Professor Ferrara is Director of the International
Institute of Forecasters, an international association aiming at bridging the gap
between theory and applications in forecasting, through the organization of workshops
and conferences and the publication of an academic journal, the International Journalof Forecasting. He is also an associate editor of this journal. Professor Ferrara holds a PhD in Applied
Mathematics from the University of Paris North (2001) and a Research Habilitation in Economics from theUniversity of Paris 1 – Panthéon – Sorbonne (2007). His academic research mainly focuses on international
economics, international finance, macroeconomic forecasting, non-linear econometric modelling and businesscycle analysis. He published more than 50 papers in international and national academic journals, chapters inbooks, as well as books on international macroeconomics and on time series modelling.

Title: Business cycle dynamics after the Great Recession: An extended
Markov-Switching dynamic factor model
Joint with Catherine Doz (University Paris 1 Panthéon-Sorbonne) and Pierre-Alain Pionnier (OECD)The Great Recession and the subsequent period of subdued GDP growth in most advanced economies havehighlighted the need for macroeconomic forecasters to account for sudden and deep recessions, periodsof higher macroeconomic volatility, and fluctuations in trend GDP growth. In this paper, we put forward anextension of the standard Markov-Switching Dynamic Factor Model (MS-DFM) by incorporating two newfeatures: switches in volatility and time-variation in trend GDP growth. First, we show that volatility switches
largely improve the detection of business cycle turning points in the low-volatility environment prevailingsince the mid-1980s. It is an important result for the detection of future recessions since, according to ourmodel, the US economy is now back to a low-volatility environment after an interruption during the GreatRecession. Second, our model also captures a continuous decline in the US trend GDP growth that started
a few years before the Great Recession and continued thereafter. These two extensions of the standard MSDFM framework are supported by information criteria, marginal likelihood comparisons and improved real-time
GDP forecasting performance.

Tomohiro Hirano (Royal Holloway, University of London)
Tomohiro Hirano is an Associate Professor of Economics, Royal Holloway, Universityof London and Research Associate at Center for Macroeconomics at London Schoolof Economics and Research Fellow at the Canon Institute for Global Studies. Tomohiro
Hirano's research mainly focuses on the interactions between asset price bubbles
and macroeconomic activities.

Title: Wealth Concentration and Speculative Bubbles
Joint with Jose Scheinkman (Columbia University) and Makoto Nirei (Tokyo University)
We develop a macroeconomic model with heterogeneous agents that generates thestationary distribution of wealth with Pareto tail endogenously. We show that Top-end wealth concentration canbe a signal of the formation of speculative bubbles and macroeconomic instability. Moreover, we demonstratethat financial market deregulation or technological innovations contribute to greater wealth inequality andmacroeconomic instability through the formation of speculative bubbles.

Tatsuyoshi Okimoto (EHESS-FFJ, and AustralianNational University)
Tatsuyoshi Okimoto is an Associate Professor of Economics and Finance at theCrawford School of Public Policy, Australian National University and co-editorof Japanese Economic Review and Gendai Finance (journal of Nippon Finance
Association in Japanese). He is currently an FFJ/Banque de France Fellow at theFondation France Japon de l’EHESS. He received his PhD in economics from theUniversity of California, San Diego in 2005 and worked for Hitotsubashi Universityand Yokohama National University before joining the Australian National University.
His current research has focused on Financial Econometrics, Macroeconometrics andInternational Finance. He has been awarded the GPIF Finance Awards (2017), 2015 Junko Maru Prize, and2014 Securities Analysts Journal Prize.

Title: International spillover effects of unconventional monetary policiesof major central banks
Joint with Tomoo Inoue (Seikei University)
This paper examines the effects of unconventional monetary policies (UMPs) by the major central banks,
namely the Bank of England (BOE), Bank of Japan (BOJ), European Central Bank (ECB) and the FederalReserve (Fed) on the international financial markets, taking global spillovers into account. To this end, weapply the global VAR model to 35 countries and one region for the period from March 2009 to July 2019.
Our results suggest that, though each domestic asset price has appreciated in response to monetary easing
policy shocks of each central bank, the significant and persistent responses are observed only for the US andeurozone. For the UK and Japan, the responses are consistent with prediction, but it lasts only for the shortterm. Regarding the global influence, the response patterns vary across four assets and central banks. For
example, the UMPs of Fed, ECB, and BOJ show significant impacts on the regional sovereign bond markets ingeneral. In contrast, the BOE’s UMPs have little effects on the overseas sovereign bond markets. In addition,the ECB seems to have relatively stronger effects on global corporate bond markets, while the Fed and BOJ’sUMPs raise the global equity prices considerably, although the BOJ’s UMP effects are less persistent.

Francesco Pappadà (Paris School of Economics)
Francesco Pappadà is currently an Invited Professor at Paris School of Economics.
He joined Banque de France as a research economist in December 2014, after being a
post-doctoral researcher and visiting fellow at HEC Lausanne, University of California
Berkeley and Einaudi Institute for Economics and Finance in Rome. His researchinterests are in macroeconomics and international macroeconomics. He received hisPh.D. in Economics from Paris School of Economics in 2011.

Title: Firm turnover in the export market and the casefor ﬁxed exchange rate regime
Joint with Masashige Hamano (Waseda University)
This paper revisits the case for ﬂexible vs. ﬁxed exchange rate regime in a two-country model withﬁrm heterogeneity and nominal wage rigidity under incomplete ﬁnancial markets. Dampening nominal
exchange rate ﬂuctuations simultaneously stabilizes the ﬁrm turnover in the export market. When ﬁrms
are homogeneous and low productive, the ﬁxed exchange rate regime dominates the ﬂexible one because
it reduces the ﬂuctuations in labor demand arising from entry and exit of exporters following a demandshock. We also show that an alternative regulation policy in the export market does not rule out the possible
adoption of a managed ﬂoating regime.

Julia Schmidt (Banque de France)
Julia Schmidt is a research economist at the Banque de France's International
Macroeconomics Division. Her research concerns international economics, among
others international banking, as well as the role of product and technology standards
for macroeconomic dynamics and trade flows. She holds a PhD in international
economics from the Graduate Institute (IHEID) Geneva.

Title: Patents that match your standards: Insights fromlinking patents and standards
Joint with Antonin Bergeaud (Banque de France)
Patent data have been used as indicators of technological progress, but judging the technological and thus
economic value of a patent is inherently difficult. On the other hand, data on technological standardization canhelp identify technology adoption at the aggregate level: when technologies are standardized, this represents
an industry-wide consensus to adopt a certain technology. By matching patents to standards using text-mining
techniques, we are able to characterize the economic value of a patent. We show that patents that are strongly
linked to standards are economically more valuable. We use our new measure to investigate how a standard
affects the life-cycle of a technology and analyze the firm-level responses to patenting.

Etsuro Shioji (Hitotsubashi University)
Etsuro Shioji is a Professor at the Department of Economics, Hitotsubashi University.
His main research area is macroeconomics. After receiving his Ph.D. from Yale
University, he has taught at Universitat Pompeu Fabra and Yokohama NationalUniversity, before joining his current workplace. He also serves as a Councillor tothe Institute for Monetary and Economic Studies of the Bank of Japan, and is also anAdvisor to the Research Institute of Capital Formation of the Development Bank ofJapan.

Title: How policies are perceived in the market for theJapanese government bonds: Evidence from volatility smiles
This paper studies how policy announcements and related news affect perceptions of the participants in themarket for the Japanese Government Bonds (JGBs). Despite that the gross government debt to GDP ratio now
exceeds 200%, the JGB market has remained surprisingly calm. Is this because, as some have suggested,
the Bank of Japan exerts dominant influence over the market? Or, if we look in the right place, could weuncover even a trace of anxiety in the minds of the market participants? To answer these questions, this paper
utilizes information from the market for the JGB Futures Options: options are essentially insurances against
future price risks, and their prices are expected to contain useful information about the subjective probability
distributions that the investors have in their mind. Based on the model of Black (1976) and using observed
option prices, I derive implied volatility at different strike prices. This produces the so-called “volatility smile”.
I study how the smile curve has responded to various monetary policy announcements and news related tofuture fiscal solvency. The study confirms the dominant influence of the central bank policies.