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

Matthieu Lemoine (1) , Harri Turunen (1) , Mohammed Chahad (1) , Antoine Lepetit (1) , Anastasia Zhutova (1) , Pierre Aldama (1) , Pierrick Clerc (1) , Jean-Pierre Laffargue (2)

1 Centre de recherche de la Banque de France
2 CES - Centre d'économie de la Sorbonne

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.

Mots clés: forward guidance; monetary policy; expectations; semi-structural modeling

Domaines: Economies et finances

Matthieu Lemoine, Harri Turunen, Mohammed Chahad, Antoine Lepetit, Anastasia Zhutova, et al.. The FR-BDF Model and an Assessment of Monetary Policy Transmission in France, Working Paper Series no. 736, Banque de France. 2019. ⟨hal-02400611⟩