Jean-Bernard Chatelain

Ecole d'économie de Paris

Using the second order Taylor expansion of the Lagrangian of the Ramsey model of optimal savings, wealth is included in the quadratic loss function, and not only consumption . Its weight is given by the degree of concavity of the decreasing returns to scale production function times the marginal utility of consumption, whereas the weight of consump...

Cet article démontre que l’équilibre déterminé par l’engagement d’une Banque Centrale à suivre un règle de taux d’intérêt directeur non stationnaire « super-inertielle » (où la somme des paramètres des taux d’intérêt passés dépasse un et ne dépend pas de la persistence des chocs) ne correspond pas à une solution de l’équilibre stable d’une politiqu...

Preliminary chapter for forthcoming ISTE-Wiley Encyclopedia, Macroeconomics. This chapter presents guidelines for modelling macroeconomic stabilization with funds rate rules. We check the controllability of benchmark monetary policy transmission mechanism. We design optimal monetary policy rules. We set a Keynesian Taylor principle of reduced form...

This paper demonstrates that the equilibrium determined by the commitment of a Central Bank to a non-stationary ("super-inertial") interest rate rule (where the sum of the parameters of the lags of the interest rate exceeds one and does not depend on the persistence of shocks) does not correspond to the unique bounded solution and the stable equili...

Article à paraître dans la Revue Française d'Economie (2022), 37(3), pp. 79-94. Cet article pointe deux inconvénients concernant l'usage actuel des anticipations rationnelles dans les modèles nouveaux-Keynésiens d'équilibre général dynamique et stochastique. Le premier inconvénient est que pour un modèle à anticipations rationnelles avec des chocs...

In the discrete-time new-Keynesian model with public debt, Ramsey optimal policy eliminates the indeterminacy of simple-rules multiple equilibria between the fiscal theory of the price level versus new-Keynesian versus an unpleasant equilibrium. If public debt volatility is taken into account into the loss function, the interest rate responds to pu...

In the discrete-time new-Keynesian model with public debt, Ramsey optimal policy eliminates the indeterminacy of simple-rules multiple equilibria between the fiscal theory of the price level versus new-Keynesian versus an unpleasant equilibrium. If public debt volatility is taken into account into the loss function, the interest rate responds to pu...

This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of...

This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of...

For static panel data models that include endogenous time-invariant variables correlated with individual effects, exogenous averages over time of time-varying variables can be internal instruments. To pretest their exogeneity, we first estimate a random effects model that includes all averages over time of time-varying variables (Mundlak, 1978; Kri...

For static panel data models that include endogenous time-invariant variables correlated with individual effects, exogenous averages over time of time-varying variables can be internal instruments. To pretest their exogeneity, we first estimate a random effects model that includes all averages over time of time-varying variables (Mundlak, 1978; Kri...

A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete lack of credibility, with the certainty that the policy maker will renege his commitment ("optimal discretion"...

A minimal central bank credibility, with a non-zero probability of not renegning his commitment ("quasi-commitment"), is a necessary condition for anchoring inflation expectations and stabilizing inflation dynamics. By contrast, a complete lack of credibility, with the certainty that the policy maker will renege his commitment ("optimal discretion"...

The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is given to the question if policy instruments are predetermined or only forward looking. Using the new-Keynesian...

The aim of the present paper is to provide criteria for a central bank of how to choose among different monetary-policy rules when caring about a number of policy targets such as the output gap and expected inflation. Special attention is given to the question if policy instruments are predetermined or only forward looking. Using the new-Keynesian...

This paper is a study of the history of the transplant of mathematical tools using negative feedback for macroeconomic stabilization policy from 1948 to 1975 and the subsequent break of the use of control for stabilization policy which occurred from 1975 to 1993. New-classical macroeconomists selected a subset of the tools of control that favored t...

If there is a non-negligible sensitivity of core Inflation to exogenous cost-push shocks and if a cost-push shock (for example, energy price) turns to be more persistent than core inflation for more than six quarters, it is optimal for central banks funds rate to respond not only to core inflation deviation from its target but also to respond relat...

With non-controllable auto-regressive shocks, the welfare of Ramsey optimal policy is the solution of a single Riccati equation of a linear quadratic regulator. The existing theory by Hansen and Sargent (2007) refers to an additional Sylvester equation but miss another equation for computing the block matrix weighting the square of non-controllable...

With non-controllable auto-regressive shocks, the welfare of Ramsey optimal policy is the solution of a single Ricatti equation of a linear quadratic regulator. The existing theory by Hansen and Sargent (2007) refers to an additional Sylvester equation but miss another equation for computing the block matrix weighting the square of non-controllable...

This paper compares different implementations of monetary policy in a new-Keynesian setting. We can show that a shift from Ramsey optimal policy under short-term commitment (based on a negative feedback mechanism) to a Taylor rule (based on a positive feedback mechanism) corresponds to a Hopf bifurcation with opposite policy advice and a change of...

We consider a frictionless constant endowment economy based on Leeper (1991). In this economy, it is shown that, under an ad-hoc monetary rule and an ad-hoc fiscal rule, there are two equilibria. One has active monetary policy and passive fiscal policy, while the other has passive monetary policy and active fiscal policy. We consider an extended se...

The reference model of frictionless endowment economies includes a Fisher relation for the real interest rate and government intertemporal budget constraint. For this model, Ramsey optimal policy mix is a unique equilibrium with an interest rate peg and a "passive" fiscal rule with a negative-feedback value of its parameter stabilizing public debt....

This article presents an algorithm that extends Ljungqvist and Sargent's (2012) dynamic Stackelberg game to the case of dynamic stochastic general equilibrium models including forcing variables. Its first step is the solution of the discounted augmented linear quadratic regulator as in Hansen and Sargent (2007). It then computes the optimal initial...

This algorithm extends Ljungqvist and Sargent (2012) algorithm of Stackelberg dynamic game to the case of dynamic stochastic general equilibrium models including exogenous forcing variables. It is based Anderson, Hansen, McGrattan, Sargent (1996) discounted augmented linear quadratic regulator. It adds an intermediate step in solving a Sylvester eq...

Post print published in 2018, History of Economic Ideas, 26(2), pp.65-101. DOI: 10.19272/201806102004

A number of macroeconomic theories, very popular in the 1980s, seem to have completely disappeared and been replaced by the dynamic stochastic general equilibrium (DSGE) approach. We will argue that this replacement is due to a tacit agreement on a number of assumptions, previously seen as mutually exclusive, and not due to a settlement by ‘nature’...

A number of macroeconomic theories, very popular in the 1980s, seem to have completely disappeared and been replaced by the dynamic stochastic general equilibrium (DSGE) approach. We will argue that this replacement is due to a tacit agreement on a number of assumptions, previously seen as mutually exclusive, and not due to a settlement by 'nature'...

What Will Be the New Standards for Monetary and Macroprudential Policies? This paper is an account of a panel discussion during the GDRE conference in Nice in June 2015. The theme is the new normal of monetary and macroprudential policy, after a rise of interest rate over the zero lower bound and the end of quantitative easing. Besides the monetary...

This paper demonstrates the existence of a finite set of equilibria in the case of the indeterminacy of linear rational expectations models. The number of equilibria corresponds to the number of ways to select n eigenvectors among a larger set of eigenvectors related to stable eigenvalues. A finite set of equilibria is a substitute to continuous (u...

This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values) and minimizing the volatility of the policy interest rates, when the central bank precommits to financial stab...

Have we Made Banking « Good » This paper reports on the deliberations of a special plenary panel session organised on behalf of the UK’s Monetary Macro, Finance Research Group (MMFRG) at the 31st International Symposium of the Groupement de Recherche Européen (GdRE) : Monnaie, Banque et Finance (MBF) on 19th June 2014 in Lyon. The overall conclusio...

Can we Identify Economic Policies Stabilizing an Unstable Economy ? This paper shows that rules of optimal policy under commitment allow policymakers to lean against bubbles and to stabilize an unstable economy. In this framework, policymakers anchor the initial values of the expectations of the private sector. Then, this paper sets identification...

Cet article montre que des règles de politiques macroéconomiques avec engagement permettent aux décideurs politiques de stabiliser des grandeurs macroéconomiques (inflation, prix d’actifs, dettes) lorsque leur croissance est trop élevée (bulles) ou leur décroissance trop forte (krach). Cette stabilisation évite de faire diverger une économie de sa...

This review of the book "The Challenge of Financial Stability: A New Model and its Applications" by Goodhart C.A.E. and Tsomocos D.P. highlights the potential of the framework of strategic partial default of banks with credit chain on the interbank market for further theoretical and applied research on financial stability.

This paper investigates the relevance of the No-Ponzi game condition for public debt (i.e. the public debt growth rate has to be lower than the real interest rate, a necessary assumption for Ricardian equivalence) and of the transversality condition for the GDP growth rate (i.e. the GDP growth rate has to be lower than the real interest rate). Firs...

In multiple regressions, explanatory variables with simple correlation coefficients with the dependent variable below 0.1 in absolute value (such as aid with economic growth) may have very large and statistically significant estimated parameters which are unfortunately "outliers driven" and spurious. This is obtained by including another regressor...

The bargaining power of international banks is currently still very high as compared with what it was at the time of the Bretton Woods conference. As a consequence, systemic financial crises are likely to remain recurrent phenomena with large effects on macroeconomic aggregates. Mainstream macroeconomic models dealing with financial frictions faile...

Fallacious liaisons: near multicollinearity and classical suppressors, aid, policies and growth This paper shows that a multiple regression with two highly correlated explanatory variables, both of them with a near zero correlation with the dependent variable may correspond to a spurious regression or to a homeostatic model, with estimates highly s...

In 2008, the French universities evaluation agency (aeres) gave its best grade (A+) to 90 reviews in Economics and Management among 684 academic journals. This paper shows that 109 journals among 594 (18%) remaining journals with lower aeres ranking (A, B or C), have larger Social Science Citation Index Impact Factors in 2008 than the journal ranke...

This paper shows that a multiple regression with two highly correlated explanatory variables, both of them with a near zero correlation with the dependent variable may correspond to a spurious regression or to a homeostatic model, with estimates highly sensible to outliers. The regression method does not allow how to decide which one of the two mod...

In 2008, the French universities evaluation agency (AERES) gave its best grade (A+) to 90 reviews in Economics and Management among 684 academic journals. This paper shows that 109 journals among 594 (18%) remaining journals with lower AERES ranking (A, B or C), have larger Social Science Citation Index Impact Factors in 2008 than the journal ranke...

This companion paper to Chatelain and Ralf (2012), 'Spurious regressions with near-multicollinearity' put their results into the contexts of the history of statistics, of the current publication bias in applied sciences and of the substantive versus statistical significance debate. This article presents a particular case of spurious regression, whe...

This paper studies under which conditions the share of profit in value-added, financial constraints on investment and capital shortage may foster unemployment and may limit the growth of capital and/or the growth of aggregate demand, in a stock-flow consistent model. The efficiency of demand-side versus supply-side economic policies (decrease of th...

This paper studies how the assignment of patents as collateral determines the savings of firms and magnifies the effect of innovative rents on investment in research and development (R&D). We analyse the behaviour of innovative firms that face random and lumpy investment opportunities in R&D. High growth rates of innovations, possibly higher than t...

Cet article présente un cas particulier de régression non fondée, lorsqu'une variable dépendante a un coefficient de corrélation simple proche de zéro avec deux autres variables, qui sont en revanche très corrélées entre elles. Dans ce type de régressions, les paramètres mesurant la taille des effets sur la variable dépendante sont très élevés. Ils...

This paper proposes a new pre-test estimator of panel data models including time invariant variables based upon the Mundlak-Krishnakumar estimator and an "unrestricted” Hausman-Taylor estimator. The paper evaluates the biases of currently used restricted estimators, omitting the average-over-time of at least one endogenous time-varying explanatory...

This paper studies how the assignment of patents as collateral determines the savings of firms and magnifies the effect of innovative rents on investment in research and development (R&D). We analyse the behaviour of innovative firms that face random and lumpy investment opportunities in R&D. High growth rates of innovations, possibly higher than t...

En 2008, l'agence d'�valuation de la recherche et de l'enseignement sup�rieur (AERES) a attribu� sa meilleure note (A+) � 90 revues en �conomie et gestion parmi 684 revues. Cet article montre que 109 revues parmi les 594 (18%) revues class�es A, B ou C par l'AERES ont des facteurs d'impact par leurs citations en 2008 issus du Social Science Citatio...

This paper proposes consistent moment selection procedures for generalized method of moments estimation based on the J test of over-identifying restrictions [Hansen, L.P., 1982. Large sample properties of generalized method of moments estimators. Econometrica 50, 1029–1054] and on the Eichenbaum, Hansen and Singleton test of the validity of a subse...

This paper investigates Stulz [2005] "twin agency problems" (government expropriation and informed shareholders diversion of funds) explanation of the cross country variation of corporate ownership concentration. Below a tax threshold, ownership concentration depends only on public governance indi-cators (such as corruption or expropriation risk) a...

This paper studies how the imperfect collateral assignments of patents contribute to "deep pockets'' savings of innovative firms facing random investment opportunities in research and development (R&D) and determine the growth of their innovations, using a version of the Kiyotaki and Moore [1997] model of credit cycles. Results are: patents as coll...

Patents as collateral and the growth of innovations The effect of the imperfection of collateral assignments of patents on the growth of innovations and the equilibrium interest rate is studied in this paper. It leads to the following results: security interests in patents leverage the growth of innovations and the effect of a reduction of the impe...

The effect of the imperfection of collateral assignments of patents on the growth of innovations and the equilibrium interest rate is studied in this paper. It leads to the following results: security interests in patents leverage the growth of innovations and the effect of a reduction of the imperfection of collateral assignments has a marked effe...

Using a large panel of French manufacturing firms, this paper first reports tests for cash flow misspecification in structural Euler equation including or not leverage. If those tests are not rejected for both Euler equations, in a second step, a direct test on the omission of leverage in the Euler equation is reported. Three groups of “financially...

Using a large panel of French manufacturing firms, this paper first reports tests for cash flow misspecification in structural Euler equation including or not leverage. If those tests are not rejected for both Euler equations, in a second step, a direct test on the omission of leverage in the Euler equation is reported. Three groups of "financially...

When limiting the extent of the hidden economy, tax inspection may be a substitute to private monitoring of investment projects. When enforcing investors protection, the judiciary system is a complement to private governance as it decreases private monitoring costs. Corporate income tax may finance government expenditures related to tax inspectors...

This paper studies how credit rationing affects endogenous growth when capital and debt are related to the firm's internal net worth, taken as collateral. The accumulation of firm's net worth determines the growth rate of capital and the growth rate of the economy. The relation between growth and interest rate is then negative without requiring con...

It is usually difficult to exhibit a statistically significant effect of the cost of capital on investment. It is in contradiction with the common practice of the selection of investment project relies on expected discounted returns, where the discount factor is the tax adjusted weighted average cost of capital (WACC). In this practice, WACC plays...

This paper studies endogenous growth driven by an expanding variety of product where lenders limit credit up to the collateralizable value of existing patents. Due to R&D investment risk, there is a composition effect between innovative firms currently contrained and innovative firms anticipating future contraints (hence accumulating current profit...

Proper conduct of monetary policy requires understanding the monetary transmission mechanism, to monitor the economy, make decisions on the stance of policy, and explain the policy actions to the public. Hence, gathering evidence on the monetary transmission mechanism in the euro area has been a priority for the Eurosystem. This 2003 book presents...

This paper analyzes the effect of financial constraints on the investment behaviour of French industrial firms testing Euler equations on various sub-samples over the period 1993-1996. More precisely, we test the model with an increasing cost of borrowing as leverage increases including an agency premium parameter. First of all, the agency premium...

In this paper we present comparative results on the determinants of firms' investment and their link to monetary policy. The results have been obtained by the Eurosystem Monetary Transmission Network. This network has produced a series of papers in which the use of micro data permits estimating and quantifying the relevance of two channels of monet...

This paper surveys issues with respect to the structural modelling of econometrictests of investment facing financial constraints, to their link with firmsdata and asset prices, and to their consequences for macroeconomic modelling.The key issue is to provide conditions which support the interpretation of thesensitivity of investment to liquidity v...

This paper presents a comparable set of results on the monetary transmission channels on firminvestment (the interest rate channel and the broad credit channel) for the four largest euro-areacountries (Germany, France, Italy and Spain), using particularly rich micro datasets for eachcountry containing over 215,000 observations from 1985 to 1999. Fo...

Using a large panel of 6946 French manufacturing firms, this paper investigates the effect of sales, of the cost of capital and of liquidity constraint variables (cash flow or cash stock) on the stock of capital from 1990 to 1999. The user cost elasticity is at the most 0.26 in absolute terms for all the firms of the sample. Three groups of firms r...

This paper presents an overview of the results of a research project on monetary transmission pursued by the Eurosystem, which has analysed micro data on firms and banks in several countries of the euro area in great detail. There is strong empirical support for an interest rate channel working through firm investment. Furthermore, a credit channel...

In this paper we present comparable results on the determinants of firms' investment and their link to monetary policy. The results have been obtained by the Eurosystem Monetary Transmission Network. This network has produced a series of papers in which the use of micro data permits estimating and quantifying the relevance of two channels of moneta...

In this paper we present comparative results on the determinants of firms' investment and their link to monetary policy. The results have been obtained by the Eurosystem Monetary Transmission Network. This network has produced a series of papers in which the use of micro data permits estimating and quantifying the relevance of two channels of monet...

Introduction Monetary policy is generally thought to be able to affect business investment through multiple channels. First, a traditional ‘interest rate channel’ is identified, whereby changes in market interest rates imply changes in the cost of capital, which in turn affect investment. However, the difficulties of using aggregate data to find cl...

Using a large panel of 6,946 French manufacturing firms, this paper investigates the effect of monetary policy on investment from 1990 to 1999 through the cost-of-capital and the cash-flow channels. We compare several specifications of neo-classical demand for capital, taking into account transitory dynamics. The user cost of capital has a signific...

This paper analyzes the relationship between banks’ divergent strategies toward specialization and diversification of financial activities and their ability to withstand a banking sector crash. We first generate market-based measures of banks’ systemic risk exposures using extreme value analysis. Systemic banking risk is measured as the tail be...

This paper represents the authors' personal opinions and does not nessarily reflect the views of the institutions they are affiliated to. We would like to thank the members of the Eurosystem' s Monetary Transmission Network and the participants of the monetary economics workshop at the NSER Summer Institute 2001 for helpful discussions and feedback...

The paper investigates, from the welfare and growth point of view, the determination of the optimal capacity of the banking system. For that purpose, we consider an overlapping generation model with endogenous growth. There is horizontal differentiation and imperfect competition in the banking sector. Macro-economic shocks affect the return on capi...

Using a large panel of 6,946 French manufacturing firms, this paper investigates theeffect of the cost of capital and on cash flow on investment from 1990 to 1999. We compareseveral specifications of neo-classical demand for capital, taking into account transitorydynamics. The user cost of capital has a significant negative elasticity with respect...

We present a comparable set of results on the monetary transmission channels on firm investment for the four largest euro-area countries (Germany, France, Italy and Spain). With particularly rich micro datasets for each country containing over 215,000 observations from 1985 to 1999, we explore what can be learned about the interest channel and the...

In this paper, financial infrastructures increase the efficiency of the banking sector: they decrease the market power (due to horizontal differentiation) of the financial intermediaries, lower the cost of capital, increase the number of depositors and the amount of intermediated savings, factors which in turn increase the growth rate and may help...

This note shows that, with pre-set price and capital decisions of firms facing uncertainty and financial market imperfections, price, mark up and the expected degree of capacity utilization (resp. capital) decreases (resp. increases) with the firm internal net worth.

This paper investigates three pitfalls concerning the test of the Euler equation facing quadratic adjustment costs and perfect capital markets on a large balanced panel data of 4025 French firms. First, the quadratic parameterization of adjustment costs is too restrictive, and power series approximations of adjustment costs are tested. Second, we i...