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Mr. Pierre Cahuc and Stéphane Carcillo
Does labor court uncertainty and judge subjectivity influence firms’ performance? We study the economic consequences of judge decisions by collecting information on more than 145,000 Appeal court rulings, combined with administrative firm-level records covering the whole universe of French firms. The quasi-random assignment of judges to cases reveals that judge bias has statistically significant effects on the survival, employment, and sales of small low-performing firms. However, we find that the uncertainty associated with the actual dispersion of judge bias is small and has a non-significant impact on their average outcomes.
International Monetary Fund. Monetary and Capital Markets Department
The Financial Sector Assessment Program (FSAP) took place against the backdrop of an ongoing recovery of the financial system. Since the global financial crisis (GFC), financial regulation has been substantially enhanced by the implementation of euro area-wide (EA-wide) regulatory and supervisory frameworks. Furthermore, the Italian authorities have implemented important measures that improved governance, facilitated capitalization, raised prudential requirements, and improved asset quality. In response, Italian banks have made substantial progress tackling legacy non-performing loans (NPLs) and improving solvency ratios.
Katharina Bergant, Michael Fidora, and Martin Schmitz
We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase Programme at the security level. Our empirical analysis shows that euro area investors (in particular investment funds and households) actively rebalanced away from securities targeted under the Public Sector Purchase Programme and other euro-denominated debt securities, towards foreign debt instruments, including `closest substitutes', i.e. certain sovereign debt securities issued by non-euro area advanced countries. This rebalancing was particularly strong during the first six quarters of the programme. Our analysis also reveals marked differences across sectors as well as country groups within the euro area, suggesting that quantitative easing has induced heterogeneous portfolio shifts.
Jean-Marc Fournier and Philipp Lieberknecht
This paper presents a model-based fiscal Taylor rule and a toolkit to assess the fiscal stance, defined as the change in the structural primary balance. This is built on the normative buffer-stock model of the government (Fournier, 2019) which includes key channels like hysteresis, cycle-dependent multipliers and a risk premium. A simple fiscal Taylor rule prescribes the fiscal stance as a function of past government debt, past output gap and the past structural primary balance. Applications suggest several advanced economies could have better managed their fiscal stance over the last 20 years. Simulations provide fiscal stance recommendations over the medium-term.
International Monetary Fund. Monetary and Capital Markets Department
This technical note on select issues examines different aspects of supervision and oversight in the French financial system. This chapter focuses on the regulatory requirements and supervisory practices that are most relevant to financial stability. In response to Single Supervisory Mechanism initiatives, the French Prudential Supervision and Resolution Authority (ACPR) has sharpened its focus on governance issues, although business model and profitability risk remains the main challenge for the Less Significant Institutions (LSI) sector. The SSM’s commitment to consistent high supervisory standards has shaped the ACPR’s supervisory approach to LSIs in other important ways. Business model and profitability risk remains the main challenge for the LSI sector in France. As noted, earnings have been under pressure due to the persistent low interest rate environment and stiff competition within the banking sector. Similarly, the ACPR’s assessment is that liquidity risk does not pose significant issues for the LSI sector in France.