Re-estimated FR-BDF: New Features and an Assessment of Monetary Policy Tightening in France

Ugo Dubois, Bruno Ducoudré, Raphaël Martin, Anna Petronevich, Caterina Seghini, Camille Thubin and Harri Turunen

Working papers from Banque de France

Abstract: This paper presents the updated and re-estimated version of the Banque de France’s semi-structural FR-BDF model, the institution’s core framework for quarterly projections and policy scenario analysis. The update reflects major statistical and structural shifts, including INSEE’s transition to a 2020 base year and the volatility during the COVID-19 period. The re-estimated model features a lower capital share, a weaker underlying productivity trend, a steeper price Phillips curve along with a flatter wage Phillips curve, while adding a credit block and an enhanced consumption equation that captures short-run income effects. The updated FR-BDF delivers stronger and faster real effects of monetary policy — with larger GDP and unemployment responses due to amplified transmission through long-term rates and the exchange rate — while nominal responses are more muted. Using the updated model, the recent monetary tightening is assessed to lower VA inflation by –0.6 pp and reduce GDP growth by 1 pp (at trough) under backward-looking expectations, whereas under forward-looking expectations the responses are more front-loaded and nearly three times larger. Under the more realistic hybrid expectations mode, VA inflation falls by about 1.2 percentage points and GDP growth by roughly 2 percentage points at the trough. These magnitudes remain broadly consistent with benchmark assessments reported in the literature.

Keywords: Semi-structural Modeling; Expectations; Monetary Policy (search for similar items in EconPapers)
JEL-codes: C54 E37 (search for similar items in EconPapers)
Pages: 133 pages
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1044

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