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

Abstract

Dynamic factor models, International business cycles, Sign restrictions, C3, E32, F00, E5,

Three Cycles: Housing, Credit, and Real Activity

“…The finding of a leading role of the U.S. cycles in global cycles is in line with the literature (for example, Eickmeier, 2007;Kabundi and Nadal De Simone, 2007a). However, the result that credit developments in the United States are not a driving factor in many countries over the short to medium term underscores the challenges of drawing policy implications-the decision on how much weight to give to U.S. credit developments in monetary analysis is likely to depend on the time horizon one concentrates on.…”

Recent French Export Performance: Is there a Competitiveness Problem?

“…Given the limitations of the VAR methodology-the most conspicuous being that it cannot accommodate a large panel of series without the risk of running short of degrees of freedom- Stock andWatson (1998 and use the approximate structural dynamic factor model on a large panel of developed countries' variables. Like Kabundi and Nadal De Simone (2007) and Eickmeier (2007), find a positive and significant effect of U.S. demand shocks on French and German output, while EU supply shocks tend to have important effects on French and German output.…”

“…Following the insights of Sims and Zha (1999), and as in Peersman (2005), Canova and de Nicoló (2003), Eickmeier (2007), Kabundi and Nadal De Simone (2007) the number of angles between 0 and π is assumed to be 12: this implies 6,191,736,421x10 10 (12 10 ) rotations. Hence, the rotated factor t t Pw w = explains in total all the variation measured by the first two eigenvalues.…”

“…Evidence shows that a significant part of French activity fluctuations has a foreign source (e.g., Kose, Otrok, and Whiteman, 2003;and Kabundi and Nadal De Simone, 2007). In particular, since 2000, French foreign sector performance has experienced a substantial deterioration vis-à-vis its own past and relative to Germany.…”

“…3 See IMF, 2005. 4 See Khan, 2006. 5 See Kabundi and Nadal De Simone, 2007. This paper performs a descriptive analysis of French export data by destination and by SITC product classification distinguishing between the cyclical and the trend components of the series. Next, it analyzes the behavior of prices and quantities following a domestic and a foreign shock to the French economy; the paper contrasts and compares the reaction of French and German variables to shocks to unit labor costs and to terms of trade.…”