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The FR-BDF Model and an Assessment of Monetary Policy Transmission in France

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

Working papers from Banque de France

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: : Semi-structural Modeling; Expectations; Monetary Policy; Forward Guidance. (search for similar items in EconPapers)
JEL-codes: C54 E37 (search for similar items in EconPapers)
Pages: 141 pages
Date: 2019
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (6) Track citations by RSS feed

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