The SME struggle for financing: a clampdown in European banks post-crisis
Speculative expectations and financial instabilities: when the competitive environment matters
Taux d'intérêt naturel et cycles économiques européens: Economie Appliquée
European fluctuations are divided into two distinct cycles: a short term one, and a long term one. After a presentation of their main characteristics, we propose a connection with The Austrian Business Cycle Theory. According to Wicksell, our analysis is focused on the idea that the difference between the monetary interest rate and the real interest rate constitutes a leading indicator for the business cycle. After a presentation of a theoretical model based on this suggestion, an empirical application is proposed.
Financialisation of European Economies: Pickering & Chatto Publishers, London.
The credit market plays an essential role in financing European companies. In 2004, stock market capitalization accounted for 53% of Euro zone GNP. The size of the banking sector and the depth of the intermediation process are also considerable: bank assets compared with GNP reached almost 281%. Domestic credit to the private sector (compared with GNP) represents 114%. If the Central Bank continues today to limit the credit supply of commercial banks, the fact that the latter are increasingly turning to the markets to finance themselves creates further uncertainty. The ignorance facing economic agents drive them to develop herding behavior.
We aim to verify that this behavior results above all in self-fulfilling expectations of the real prices of assets. Based on a database supplied by the Bank for International Settlements (elaborated by S.V. Arthur, C. Borio and P. Lowe), we introduce the evolution of the real price of assets in Wicksellian rate differentials aimed at recounting the direction taken by the business cycles of four European Countries (Germany, Spain, France and Italy). Our results tend to show that a reduction of the monetary interest rate is a warning signal for long-term growth cycles. The latter are then clearly illustrated by the agents’ expectations of the evolution of the real prices of assets.
Mesure et critique du cycle dans les années 30: du problème épistémologique à la critique du cycle monétaire: with Dupuy, R.
The first studies concerning the business cycle were essentially framed against the classical and dominant thinking in the 19th century. Consequently, the business cycle firstly ensued from inductive approaches and then seemed to be confined to a measurement framework. The concept of business cycle has however raised a real epistemological problem. In its first expressions, the business cycle will bring into conflict inductive, abductive and deductive approaches. The critics against the monetary cycle that followed, stunned in Keynesian theory, will again highlight the measurement matter. But the econometric method will still be prevailing in the after war period.
European banks' behavior facing the contemporary subprime crisis: towards a typology: with E. Paulet & T. Abdessemed
The subprime crisis is one of the major crises that banking systems have had to cope with in recent years. One key question is how this shock has affected profitability and risk management of European banks. To put it another way, in terms of risk appraisal and therefore of profitability, has banking strategy changed further to the crisis or not? Our work intends to give a typology of banking behaviour using three main factors: profitability, risk management and regulation criteria. Using a sample of twenty two European banks, the objective is to identify the institutions whose first aim is profitability from the ones which have learnt from the crisis period and modified their management by focusing on equity requirement.
European Business Fluctuations in the Austrian Framework: Quarterly Journal of Austrian Economics
The Austrian theory mainly deals with analyzing the effects of an increased credit offer on productive structures. In this respect, we propose to link long-term growth cycles to various short-term interest rate gaps. Are European Business Cycles affected when a fall in the money market rate disrupts agents’ expectations of inflation? Using the hypothesis that individual speculation is motivated by the difference between short-term real interest rates and their natural levels, we argue that Wicksellian interest rate gaps can account for a high proportion of long-term fluctuations in four European countries (Germany, France, Italy and Spain). We present specific dating methods and filters used in order to distinguish between short-term and long-term growth cycles. The Wicksellian incentives we constructed are then significantly linked to long-term business fluctuations. Under the hypothesis of adaptive expectations of inflation, our results are enhanced.
Can solutions be found in Collaborative Governance?: International Banking Conference, South Africa
Global financial crises can be interpreted as tragedies of the commons. However, confining financial actors’ interactions into a prisoner’s dilemma hinders the players from reaching a better (more profitable for the group) issue. The aim of this paper is to seek for a self governed process which could carry off a solution, even if non pareto-optimal. Financial crises are not fateful coincidences. A useful approach to depict the way financial interactions may lead to speculative escalations and alas to crises can rely on game theory. Meanwhile, in these frameworks, rational decision making processes are not realistic, because of the uncertainty underlying each situation. Strategic and self-governed games taking into account uncertainty are then a first step of justification towards collective but free governance of the financing system.
Forecasts, Ethics and Financial Behavior: Another Reading of Economic Crises
A coopetition perspective for banking strategy: Cambridge Scholars Publishing
Earnings forecasts influence financial market fluctuations. The recent sub-prime crisis has shown that an incorrect use of information available on the markets, added to the creation of picky financial instruments can have major consequences. If the interactions among players result in recurrent financial instabilities, the complexity of global financial crises hampers regulation from giving anything other than ex post answers. The only solutions provided tend to favor transparency, easier information transmission, and more efficient market operations.
A useful approach to depict the way financial interactions still lead to speculative escalations and crises in those contexts can be based on game theory. As financial players lack information, they may find themselves locked into a prisoner’s dilemma, where competing interactions lead them finally to overbids of credit, with debt being used as a strategic device. Game theory has shown that in specific circumstances, the prisoner’s dilemmas are not inescapable situations. Cooperation may appear under certain conditions. These frameworks, notably developed by Axelrod (1992), must however be compared with the very complicated nature of financial markets, where uncertainty prevails most of the time.
Moreover, banks play a very specific role in these instances. In collecting, creating and investing money over time, they are sometimes caught up in a conflict of interest. It is a choice to enable profitability and equity requirements to enter areas where strong levels of competition prevail. We shall argue in this chapter that instead of being locked into the prisoner’s dilemmas, banking institutions rather evolve in coopetitive spaces. In these collaborative spaces where competition and cooperation co-exist, banking credit strategies could benefit more from self-governance.
Designing Simulations for Health Managers in Sub-Saharan African Countries: Adherence to e-health services: With Hervé Garcia
This research is part of the work developed by a consortium: ‘ehealth for Sub Saharan Africa’ (eHSA). This consortium is led by Logica -UK (now part of CGI). It has been created in response to a proposition issued by the European Space Agency (ESA) with the financial support of LuxDev, Luxemburg government, and Europe – Africa Union. The consortium gathers consultants in new technology (Logica-UK), health professionals (Alter), academic researchers (France Business School) and NGOs such as Amref, Raft or Merlin. The aim of this work is to combine applied and academic outcomes to provide countries with solutions to improve their health systems and better respond to the need of their population.
L'instabilité récurrente des marchés financiers: les anticipations des acteurs au centre d'un système mondialisé: Revue Française de Gouvernance d'Entreprise
Si, lors de la crise des sub-primes, c’est bien l’environnement concurrentiel qui a poussé les banques à alimenter une véritable surenchère du crédit, cette dernière est en réalité directement liée à la nature des décisions stratégiques prises sur les marchés. Ces décisions se trouvent au cœur d’un système mondialisé où l’instabilité financière constitue désormais la règle. L’objet de ce travail est de justifier comment et pourquoi les entreprises et les banques interagissent sur leur environnement à partir d’anticipations de profits incertaines qui viennent alimenter les crises financières.