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

Matthieu Lemoine, Harri Turunen, Mohammed Chahad, Antoine Lepetit, Anastasia Zhutova, Pierre Aldama (), Pierrick Clerc and Jean-Pierre Laffargue ()
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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
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
Jean-Pierre Laffargue: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: forward guidance; monetary policy; expectations; semi-structural modeling (search for similar items in EconPapers)
Date: 2019-10
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Note: View the original document on HAL open archive server: https://hal.science/hal-02400611
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Citations: View citations in EconPapers (5)

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Working Paper: The FR-BDF Model and an Assessment of Monetary Policy Transmission in France, Working Paper Series no. 736, Banque de France (2019)
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