CHALLE Edouard

This thesis presents work on low economic growth, low inflation and low interest rates in advanced economies. Chapter 1 presents the pro-competitive effects of trade on prices, productivity and firm margins. Openness to global trade implies a larger market and greater competition among firms, which in turn leads to lower inflation and higher average productivity. Chapter 2 examines the role of market power in the transmission channels of monetary policy. A high level of market power would mitigate the effects of monetary policy and relax financial constraints. In chapter 3, positive supply shocks under zero policy rates generate divergent results between theory and empirical analysis. Specifically, in contrast to the recessionary effects of supply shocks at zero policy interest rates (ZLB) predicted by the theoretical model, the empirical analysis does not produce these expected results. The fourth chapter constructs different indicators of uncertainty at the macroeconomic level and studies how uncertainty affects economic activity. Uncertainty negatively affects economic activity. However, the scope of macroeconomic analysis is limited by a potential endogeneity problem. Chapter 5 addresses this problem through the analysis of firm-level uncertainty using business survey data. The measure of uncertainty calculated with the firms' forecast errors significantly affects activity. However, their effect varies with the sign of the error. An underperformance of the forecast significantly reduces activity, while the opposite situation has a small effect. To summarize, the first two chapters deal with inflation and market power as explanations for the low inflation and low policy impact. Chapter 3 assesses the consequences of the zero policy rate environment. The last two chapters assess the role of uncertainty at the macro and micro levels in explaining low growth.

What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specication for households' preferences towards money and consumption goods. Unlike traditional specications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.

No summary available.

There is a consensus that the severity of shocks to oil markets is declining, as is the dependence of developed economies on these shocks. Developed countries are generally energy importers, and the effect of oil shocks on oil-exporting countries may be different, especially if they are countries whose major export is oil or oil products. In addition, the commodity export orientation may change the relative performance of econometric models that are typically used for forecasting. The thesis studies and develops models for structural analysis and short-term forecasting of an oil exporting economy where Russian data are used for all empirical applications. The first chapter is devoted to the construction of a DSGE model for a commodity exporting country. The DSGE model is estimated by Bayesian methods. We find that despite the significant impact on GDP of oil shocks, business cycles in Russia are mainly domestic in origin. The second chapter examines how Bayesian methods can be applied to forecasts using a BVAR model. The third chapter applies these techniques and compares the performance of a group of non-structural models (univariate and multivariate) to forecast a set of Russian macroeconomic indicators. In the fourth chapter, forecasting focused on structural multivariate (DSGE) and nonstructural (BVAR) models. The fifth chapter quantifies the effect of different types of oil shocks on several Russian macroeconomic variables.

No summary available.

The basic tools for analyzing macroeconomic fluctuations and policies, applied to concrete issues and presented within an integrated New Keynesian framework. This textbook presents the basic tools for analyzing macroeconomic fluctuations and policies and applies them to contemporary issues. It employs a unified New Keynesian framework for understanding business cycles, major crises, and macroeconomic policies, introducing students to the approach most often used in academic macroeconomic analysis and by central banks and international institutions. The book addresses such topics as how recessions and crises spread. what instruments central banks and governments have to stimulate activity when private demand is weak. and what “unconventional” macroeconomic policies might work when conventional monetary policy loses its effectiveness (as has happened in many countries in the aftermath of the Great Recession.). The text introduces the foundations of modern business cycle theory through the notions of aggregate demand and aggregate supply, and then applies the theory to the study of regular business-cycle fluctuations in output, inflation, and employment. It considers conventional monetary and fiscal policies aimed at stabilizing the business cycle, and examines unconventional macroeconomic policies, including forward guidance and quantitative easing, in situations of “liquidity trap”—deep crises in which conventional policies are either ineffective or have very different effects than in normal time. This book is the first to use the New Keynesian framework at the advanced undergraduate level, connecting undergraduate learning not only with the more advanced tools taught at the graduate level but also with the large body of policy-oriented research in academic journals. End-of-chapter problems help students master the materials presented.

According to the stakeholder theory, Corporate Social Responsibility (CSR) is the answer given by companies to the increasing pressure from employees, shareholders, local communities, environmental NGOs or regulators to take into account the environmental and social impacts of their activities. The challenge is not simply to compensate for negative externalities but to transform companies to allow for sustainable growth. Thus, CSR pushes companies to be proactive and to exceed regulatory expectations. However, how to reconcile such different and even opposing objectives? As more and more companies integrate CSR into their strategies, governance processes seem to be the missing link in bringing together economic, social and environmental performance. This thesis presents empirical and theoretical arguments for the impact of governance at its highest level, from the board of directors to the CEO. After an introductory chapter, Chapter 2 analyzes the link between board composition and the integration of CSR into corporate strategy. It is based on a law on the representation of women on boards of directors. Adopted in France in 2011, this law has led to the appointment of new directors, most of whom are younger than their predecessors. However, this chapter shows that the increase in diversity on boards is not correlated with changes in financial and non-financial performance. This chapter is based on a study of SBF 120 companies from 2009 to 2015. However, while the characteristics of the directors are involved in the decision-making process, the implementation of strategies and the management of the company is entrusted to the CEO. Through a remuneration system with a variable component, the board of directors strives to align the interests of the CEO with its own. Chapter 3 examines the effectiveness of variable remuneration based on environmental or societal criteria. It shows that the impact of these "CSR bonuses" depends on the company's governance model. For companies with a shareholder governance model, CSR bonuses seem to have only a negative impact on financial performance. On the other hand, for companies of the partnership type, these bonuses effectively improve extra-financial performance without reducing financial performance. This empirical study is based on a global panel of 3500 companies over the period 2006-2015. Chapter 4 proposes a theoretical model to analyze the impact of the intrinsic or extrinsic nature of incentives. Based on the principal-agent model developed by Che and Yoo (2001), this chapter analyzes different incentives for a company composed of two agents working on a CSR task. Three scenarios are studied: both agents receive financial compensation, both agents are intrinsically motivated, one agent is intrinsically motivated and the other financially motivated. The model shows that the optimal scenario for the principal depends on the level of intrinsic motivation but also on the interdependence between the two agents' decisions. In the particular case of the remuneration of company directors, the empirical evidence shows that including CSR criteria in the remuneration is more adapted to companies with a high decisional interdependence. The conclusion traces the link between governance and CSR at several levels, and discusses the implication of networks and mimicry effects between firms.

The study of macroeconomic fluctuations assumes that the behavior of the whole (aggregates) cannot be reduced to the sum of the parts (agents, markets). This is because interdependencies between markets can substantially amplify, or on the contrary dampen, shocks that at any time disturb the equilibrium. The understanding of general-equilibrium effects, on which direct evidence is limited, which are empirically blurred by multiple potential confounding factors, and for which controlled experiments are almost impossible to design, is necessarily more conjectural than the study of individual behavior or of a specific market. However, ignoring these effects because they do not have the same degree of empirical certainty as a directly observed microeconomic effect can lead to serious policy mistakes.

Speculators contemplating an attack (e.g., on a currency peg) must guess the beliefs of other speculators, which they can do by looking at the stock market. As shown in earlier work, this information-gathering process may be destabilising by creating multiple equilibria. This paper studies the role played by the microstructure of the asset market in the emergence of multiple equilibria driven by information aggregation. To do so, we study the outcome of a two-stage global game wherein an asset price determined at the trading stage of the game provides an endogenous public signal about the fundamental that affects traders’ decision to attack in the coordination stage of the game. In the trading stage, placing a full demand schedule (i.e., a continuum of limit orders) is costly, but traders may use riskier (and cheaper) market orders, i.e., order to sell or buy a fixed quantity of assets unconditional on the execution price. Price execution risk reduces traders aggressiveness and hence slows down information aggregation, which ultimately makes multiple equilibria in the coordination stage less likely. In this sense, microstructure frictions that lead to greater individual exposure (to price execution risk) may reduce aggregate uncertainty (by pinning down a unique equilibrium outcome).

This thesis is composed of three independent chapters. The first chapter concerns the formation of expectations. I show that agents are likely to use a misspecified model rather than the "true" model of the economy. I consider a simple economy with two types of agents. Rational agents learn the rational expectation solution while "consistent" agents use an autoregressive model. I show that a long-run equilibrium in which coherent agents are dominant exists. Simulations show that the economy can converge to this equilibrium. The second chapter concerns intertemporal choice. I consider a model in which wealth enters into utility. I study the non-separable case, separating the income effect on labor supply from the intertemporal substitution effect. I deduce implications for economic policy and then estimate the two parameters introduced by this specification of utility. I find positive and high values for both. The third chapter presents a model of investment in the presence of adverse selection. My contribution is to provide a simple solution, easy to integrate in a macroeconomic model. Borrowers differ by the risk of their investment project as in Stiglitz and Weiss (1981). They signal the risk of their project by borrowing a fraction of the profits set aside. I obtain an analytical solution for the incentive constraint. I integrate it into a dynamic model and derive some implications.

No summary available.

This thesis studies the monetary and fiscal policies implemented in England to finance the Napoleonic Wars (1793-1815). Using a historical case study, the effects of fiscal policy on the price level are elucidated. Changes in the public deficit affect the prices of certain assets and the general price level. This effect occurs through the central bank's balance sheet, when the latter buys public debt that agents assume is not backed by tax revenues.

The first chapter proposes a theory of financial intermediation, which explains the reasons for the coexistence of traditional banks and shadow banks. The argument developed is that these two types of banks are complementary, which is due to their mutually beneficial interaction in times of crisis. This argument is consistent with some of the stylized facts of the financial crisis that we document. The second chapter of this thesis consists of a detailed exposition and quantification of transfers between different generations of life insurance savers. These transfers give rise to intergenerational risk sharing, made possible by the existence of market friction. We show that this friction consists of imperfect competition between life insurers. The third chapter of this thesis exposes the liquidity risks to which life insurance companies in France are subject, and studies the resulting investment decisions. The empirical approach based on the institutional specificities of life insurance - the modalities of taxation of savers - highlights the causality of liquidity risk on the investment choices of life insurers. The fourth chapter studies the conditions under which firms choose to enter a new market via the acquisition of an existing firm (external entry) rather than by using their existing resources (internal entry). We show that firms that enter a new market via an acquisition are more likely to be those whose human capital is a priori inadequate for that market.

This thesis is composed of three distinct chapters. In the first chapter, co-authored with Edouard Challe, we analyze the joint determination of the information embedded in prices, and the market composition by order type in an asset market with dispersed information. The market microstructure is such that informed agents can place either simple market orders or a set of limit orders. The market-makers set the price. Agents using simple market orders trade less aggressively on their information and thus reduce the information content of the price. In a market where only this type of order is present, the information embodied in the price is limited, no matter how well informed agents are about the asset's dividend. When agents can choose their type of order and limit orders are more expensive than market orders, then agents will mostly choose market orders when the accuracy of private signals tends to infinity. Limit orders are substitutes: at high levels of precision, a residual fraction of agents placing limit orders is sufficient to align the price with the agents' signals, and thus with the dividend. Thus the gain from conditioning one's orders on the price (via limit orders) in addition to one's own signal (as all agents do) disappears. We then apply this mechanism in the second chapter of this thesis. Speculators contemplating an attack (as in the case of currency crises) must guess the beliefs of other speculators, which they can do by watching the stock market. This chapter examines whether this information-gathering process is stabilizing, by better anchoring expectations, or destabilizing, by generating multiple equilibria. To do so, we study the results of a two-stage global game where an asset price determined in the trading stage of the game provides an endogenous public signal about the fundamental that affects agents' decision to attack in the coordination phase of the game. The microstructure of the asset market replicates that studied in the first chapter. Microstructure frictions that lead to greater individual exposure (to price execution risk) can reduce aggregate uncertainty (by setting a single equilibrium outcome). Finally, in the third chapter, in collaboration with Victor Lyonnet, we present a model of the interactions between traditional banks and shadow banks that speaks to their coexistence. During the 2007 financial crisis, some assets and liabilities of shadow banks were transferred to traditional banks and the assets were sold at fire sale prices. Our model replicates these stylized facts. The difference between traditional banks and shadow banks is twofold. First, traditional banks have access to a guarantee fund that allows them to finance themselves without risk in times of crisis. Second, traditional banks have to comply with costly regulations. We show that in times of crisis, shadow banks liquidate assets to pay off their creditors, while traditional banks buy these assets at fire sale prices. This exchange of assets in times of crisis generates a complementarity between traditional banks and shadow banks, where each type of intermediary benefits from the presence of the other. We find two competing effects of a small decrease in support for traditional banks in times of crisis, which we call the substitution effect and the income effect. The latter effect dominates the former, so that a lower level of expected support for traditional banks in times of crisis induces more bankers to switch to the traditional sector ex ante.

The study of macroeconomic fluctuations is based on the principle that the behavior of the whole (the aggregates) cannot be reduced to the sum of the parts (the agents, the markets). This is so because interdependencies between markets can substantially amplify, or on the contrary dampen, the shocks that at any moment disturb the equilibrium. Understanding these general equilibrium effects, for which direct evidence is limited, confounding factors are numerous, and controlled experiments are impossible, is necessarily more conjectural - but no less "scientific" - than the study of individual behaviour or of an isolated market. Ignoring these effects on the grounds that they do not have the same degree of empirical certainty as a directly observed microeconomic effect can lead to serious policy errors.

No summary available.

In this thesis, I examine the effect of uncertainty on consumption behavior in life cycle models. Although it has been recognized since the 1980s that uncertainty can substantially alter the predictions of life cycle models, some of the mechanisms involved are still poorly understood. In Chapter 1, I study the consequences of the presence of uncertainty on consumption growth, and I show that they challenge the existing belief that consumption follows a random walk in standard life cycle models. Indeed, uncertainty leads prudent households (i.e. those with convex marginal utility) to reallocate part of their present consumption to the future, which is uncertain, and thus to choose a level of present consumption lower than their expected future consumption. This implies that variables other than present consumption improve the prediction of future consumption, as they predict the precautionary difference between present and future consumption. In chapter 2, I consider the impact of uncertainty on the level of consumption of households, how it varies with their income and wealth, and thus how their consumption responds to income shocks. Since the presence of uncertainty induces households to allocate a larger share of their resources to future periods, they save more in the present period. I highlight the fact that this additional saving, called precautionary saving, varies in a decreasing and concave manner with the transitory share of income and with wealth, but in an increasing and convex manner with the permanent share of income. In chapter 3, I draw the consequences of these results for the empirical measurement of the response of consumption to income shocks. I build on the results of Chapters 1 and 2 to show that, in standard life-cycle models, consumption growth is negatively correlated with the realizations of past transitory shocks, due to precautionary behavior. Such a correlation would induce a bias in a frequently used method for estimating the response of consumption to transitory income shocks, developed by Blundell, Pistaferri and Preston (2008). Indeed, their method would attribute to present transitory shocks the changes in consumption explained by past shocks, thus predicting a too small response to transitory shocks. I generalize this method to take into account the possible influence of past shocks on consumption growth. With this more flexible estimator, I obtain that the response of consumption to transitory shocks is statistically significant and that its magnitude is consistent with the literature on the response of consumption to transitory tax cuts.

This thesis consists of three studies on the role of disagreement in economics. In the first chapter, I study the impact of judicial uncertainties on the role of disagreement in the financial market. I begin by documenting and defining these judicial uncertainties, in as much depth and detail as possible. The uncertainty related to the imperfect ability of regulators to observe is called the monitoring problem, and the uncertainty related to the penalty and enforceability problem. I introduce these concepts in a model with financial frictions. The simulation of the model shows us that the monitoring ability of regulators determines the stability or fragility of the banking sector. The cost of capital does not increase much in an economy with judicial uncertainties but the rate of return of the economy to the steady state decreases. For example, the rate of return of the economy to a steady state (after experiencing a medium-level external shock) lasts on average 7 - 12 quarters. I argue that this is due to changes in asset quality in the face of judicial uncertainty. Finally, I look at whether the simulated model could pick up the fluctuations of the business cycle after the financial crisis and it does so well. Furthermore, I provide detailed arguments for the analysis of welfare programs in the presence of judicial uncertainties. In the second chapter, I study the volatility due to disagreement in the labor market. I try to identify the sources of this high volatility in a structural way. Thus, I use a vector autoregression with stochastic volatility (Time Varying Parameter SVAR) to investigate the properties of job creation in the United States and their variations over time. The results show that a technology shock appears to explain less than 40% of the observed fluctuations in job creation volatility after the 1980s and indicate that volatility depends largely on demand and price shocks. Job vacancies (i.e., job creation) reacted negatively to technology shocks until the early 1990s. The same pattern is found for the recent period. This result is very important for public authorities because it calls into question the creation of jobs following new technologies. The third chapter is devoted to disagreement in the loan market where I show how bankruptcy law could intensify the moral hazard problem between a debtor firm and its creditors. This chapter tries to link bankruptcy law to the cost of capital by studying the level of demand for covenants in a contract. The hypothesis that I will try to validate empirically is the following: if bankruptcy law becomes more and more favorable to firms, creditors will put more and more restrictive clauses in the contract (i.e. seek to obtain a stronger control over the debtors' behavior). I validate the above hypothesis and show that an additional covenant decreases the rate of return by 23 basis points. Thus, I provide a new interpretation of covenants compared to the literature.

The run up to the euro currency initiated a period of capital inflows into southern European countries, i.e., Spain, Portugal, Italy and Greece. We document that those countries, and only them among OECD countries, concomitantly experienced a decline in the quality of their institutions. We confirm the joint pattern of capital in- flows and institutional decline in a large panel of countries. We show theoretically that this joint pattern naturally follows from a “soft budget constraint” syndrome wherein persistently cheap external funding undermines incentives to maintain good institutions –understood here as the degree of government commitment not to support inefficient firms. Low institutional quality ultimately raises the share of inefficient firms, which lowers average productivity and raises productivity dispersion across firms –the typical pattern of productivity in southern Europe over the period under consideration.

This article studies the relationship between board independence and firm operating performance in French listed companies. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in firm performance equations, thereby controlling for heterogeneity at the firm and individual levels. Our main result is to document a significant negative relationship between independence and accounting performance. This result suggests that, in the French context, the costs of independence (i.e. the informational gap supported by independent directors compared to insiders and affiliated directors) outweigh the benefits of independence (i.e. the reduction in agency costs).

While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in (firm) performance equations, thereby controlling for heterogeneity at the firm and individual levels. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).

The run up to the euro currency initiated a period of capital inflows into southern European countries, i.e., Spain, Portugal, Italy and Greece. We document that those countries, and only them among OECD countries, concomitantly experienced a decline in the quality of their institutions. We confirm the joint pattern of capital in- flows and institutional decline in a large panel of countries. We show theoretically that this joint pattern naturally follows from a “soft budget constraint” syndrome wherein persistently cheap external funding undermines incentives to maintain good institutions –understood here as the degree of government commitment not to support inefficient firms. Low institutional quality ultimately raises the share of inefficient firms, which lowers average productivity and raises productivity dispersion across firms –the typical pattern of productivity in southern Europe over the period under consideration.

What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specication for households' preferences towards money and consumption goods. Unlike traditional specications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.

We study the macroeconomic implications of time-varying precautionary savings within a general equilibrium model with borrowing constraints, aggregate shocks and uninsurable idiosyncratic unemployment risk. Our framework generates limited cross-sectional household heterogeneity as an equilibrium outcome, thereby making it possible to analyse the role of precautionary saving over the business cycle in an analytically tractable way. The time-series behaviour of aggregate consumption generated by our model is closer to the data than that implied by the hand-to-mouth and representative-agent models, and it is comparable to that produced by the Krusell and Smith (1998) model.

We formulate and estimate a tractable macroeconomic model with time-varying precautionary savings. We argue that the latter affect aggregate fluctuations via two main channels: a stabilizing aggregate supply effect working through the supply of capital. and a destabilizing aggregate demand effect generated by a feedback loop between unemployment risk and consumption demand. Using the estimated model to measure the contribution of precautionary savings to the propagation of recent recessions, we find strong aggregate demand effects during the Great Recession and the 1990–1991 recession. In contrast, the supply effect at least offset the demand effect during the 2001 recession.

We analyse the joint determination of price informativeness and the composition of the market by order type in a large asset market with dispersed information. The market microstructure is one in which informed traders may place market orders or full demand schedules and where market makers set the price. Market-order traders trade less aggressively on their information and thus reduce the informativeness of the price. in a full market-order market, price informativeness is bounded, whatever the quality of traders’information about the asset’s dividend. When traders can choose their order type and demand schedules are (even marginally) costlier than market orders, then market-order traders overwhelm the market when the precision of private signals goes to in…nity. This is because demand schedules are substitutes: at high levels of precision, a residual fraction of demand-schedule traders is sufficient to take the trading price close to traders’ signals, while the latter is itself well aligned with the dividend. Hence, the gain from trading conditional on the price (as demand-schedule traders do) in addition to one’s own signal (as all informed traders do) vanishes.

This paper studies the outcome of a two-stage global game wherein a market-based asset price determined at the trading stage of the game provides an endogenous public signal about the fundamental that a¤ects traders' decisions in the coordination stage of the game. The microstructure of the trading stage is one in which informed traders may place market orders –rather than full demand schedules– and where a competitive market-making sector sets the price. Because market-order traders face price execution risk, they trade less aggressively on their private information than demand-schedule traders, which slows down information aggregation and limits the informativeness of the asset price. When all traders place market orders, the precision of the price signal is bounded above and the outcome of the coordination stage is unique as the noise in the private signals vanishes. More generally, in an asset market with both market-order and demand-schedule traders, the presence of the former may drastically limit the range of parameters leading to multiple equilibria. This is especially true when traders optimise over their type of order, in which case market-order traders tend to overwhelm the market when the precision of the private signal is large.

What are the costs of inflation fluctuations and who bears those costs? In this paper, we investigate this question by means of a quantitative incomplete-market, heterogenous-agent model wherein households hold real and nominal assets and are subject to both idiosyncratic labor income shocks and aggregate inflation risk. A key feature of our analysis is a nonhomothetic specification for households' preferences towards money and consumption goods. Unlike traditional specifications, ours allows the model to reproduce the broad features of the distribution of monetary assets (in addition to being consistent with the distribution of nonmonetary assets). Inflation risk is found to generate significant welfare losses for most households, i.e., between 1 and 1.5 percent of permanent consumption. The loss is small or even negative for households at the very top of the productivity and/or wealth distribution.

Recent empirical literature documents that unexpected changes in the nominal interest rates have a significant effect on real stock prices: a 25-basis point increase in the nominal interest rate is associated with an immediate decrease in broad real stock indices that may range from 0.6 to 2.2 percent, followed by a gradual decay as real stock prices revert towards their long-run expected value. In this paper, we assess the ability of a general equilibrium New Keynesian asset-pricing model to account for these facts. The model we consider is a production economy with elastic labor supply, staggered price and wage setting, as well as time-varying risk aversion through habit formation. We find that the model predicts a stock market response to policy shocks that matches empirical estimates, both qualitatively and quantitatively. Our findings are robust to a range of variations and parameterizations of the model.

This thesis studies several aspects of the dynamics of asset returns. The first three chapters focus on price formation in the art market. The first chapter establishes that prices can temporarily, and partially predictably, deviate from fundamental value. This article was published in Economics Letters (Volume 122, Issue 3, pp. 432-434) and was written with Christophe Spaenjers and Luc Renneboog. Chapter 2 studies the speed of information transmission in aggregate art market prices. Chapter 3 analyzes the correlation between price and volume and supports evidence consistent with a bubble hypothesis. It was written with Luc Renneboog. Chapter 4 focuses on empirical modeling of the predictability of stock market indices in fifteen industrialized countries. It proposes to combine the information given by each country in order to improve the predictive power.

We analyse the joint determination of price informativeness and the composition of the market by order type in a large asset market with dispersed information. The market microstructure is one in which informed traders may place market orders or full demand schedules and where market makers set the price. Market-order traders trade less aggressively on their information and thus reduce the informativeness of the price. in a full market-order market, price informativeness is bounded, whatever the quality of traders’information about the asset’s dividend. When traders can choose their order type and demand schedules are (even marginally) costlier than market orders, then market-order traders overwhelm the market when the precision of private signals goes to in…nity. This is because demand schedules are substitutes: at high levels of precision, a residual fraction of demand-schedule traders is sufficient to take the trading price close to traders’ signals, while the latter is itself well aligned with the dividend. Hence, the gain from trading conditional on the price (as demand-schedule traders do) in addition to one’s own signal (as all informed traders do) vanishes.

While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in (firm) performance equations, thereby controlling for heterogeneity at the firm and individual levels. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).

We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause ‡uctuations in the trading price of bonds. Long bonds command a “liquidation risk premium” over short bonds, because they may have to be liquidated before maturity –following a bad idiosyncratic shock– precisely when their resale value is low –due to the simultaneous occurrence of a bad aggregate shock. Our framework endogenously generates limited cross-sectional wealth heterogeneity among the agents (despite the presence of uninsured idiosyncratic shocks), which allows us to characterise analytically the shape of the entire yield curve, including the yields on bonds of arbitrarily long maturities. Agents’ desire to hedge the idiosyncratic risk together with their fear of having to liquidate long bonds at unfavourable terms imply that a greater bond supply raises the level of the yield curve, while an increase in the relative supply of long bonds raises its slope.

We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause fluctuations in the trading price of bonds. Long bonds command a "liquidation risk premium" over short bonds, because they may have to be liquidated before maturity - following a bad idiosyncratic shock - precisely when their resale value is low - due to the simultaneous occurrence of a bad aggregate shock. Our framework endogenously generates limited cross-sectional wealth heterogeneity among the agents (despite the presence of uninsured idiosyncratic shocks), which allows us to characterise analytically the shape of the entire yield curve, including the yields on bonds of arbitrarily long maturities. Agentsʼ desire to hedge the idiosyncratic risk together with their fear of having to liquidate long bonds at unfavourable terms implies that a greater bond supply raises the level of the yield curve, while an increase in the relative supply of long bonds raises its slope.

While the definition of the public budget constraint does not seem to be controversial, the research focus of this thesis is the speed at which states decide to comply with this constraint. The hypothesis is that the speed of adjustment is crucial in the overall evaluation of fiscal policy as a countercyclical instrument. More specifically, we seek to answer three questions: (i) historically, how quickly have governments resolved their fiscal imbalances? (ii) what are the effects of different fiscal stimulus packages according to the speed of adjustment and their composition? (iii) how does the duration of an accommodating monetary policy influence the above results? Chapter 1 shows that the criticism of econometric tests of sustainability is not insurmountable. We try to characterize the degree of persistence of fiscal imbalances using a fractional approach, which allows us to classify countries according to the reaction functions of their fiscal authorities. Chapter 2 proposes to assess the effects of post-recovery adjustments using a general equilibrium model. Regardless of the fiscal instrument chosen for the stimulus, an acceleration of the adjustment has a negative effect on output in the medium run. Chapter 3 assesses the policy mix in terms of the timing of fiscal adjustments after the stimulus, relative to the length of the zero interest rate period. An unstable regime of excessive consolidation emerges when the commitment to fiscal adjustment is very strong, irrespective of the central bank's behavior toward inflation.

We analyse the risk-taking behaviour of heterogenous intermediaries that are protected by limited liability and choose both their amount of leverage and the risk exposure of their portfolio. Due to the opacity of the financial sector, outside providers of funds cannot distinguish "prudent" intermediaries from those "imprudent" ones that voluntarily hold high-risk portfolios and expose themselves to the risk of bankrupcy. We show how the number of imprudent intermediaries is determined in equilibrium jointly with the interest rate, and how both ultimately depend on the cross-sectional distribution of intermediaries' capital. One implication of our analysis is that an exogenous increase in the supply of funds to the intermediary sector lowers interest rates and raises the number of imprudent intermediaries. Another one is that easy financing may lead an increasing number of intermediaries to gamble for resurection following a bad shock to the sector's capital, again raising economywide systemic risk.

We study the macroeconomic implications of time-varying precautionary saving within a general equilibrium model with borrowing constraint and both aggregate shocks and uninsurable idiosyncratic unemployement risk. Our framework generates limited cross-sectional household heterogeneity as an equilibrium outcome, thereby making it possible to analyse the role of precautionary saving over the business cycle in an analytically tractable way. The time-series behaviour of aggregate consumption generated by our model is much closer to the data than that implied by the comparable hand-to-mouth and representative-agent models, and comparable to that produced by the(intractable) Krusell-Smith (1998) model.

We analyse the term structure of interest rates in a general equilibrium model with incomplete markets, borrowing constraint, and positive net supply of government bonds. Uninsured idiosyncratic shocks generate bond trades, while aggregate shocks cause fluctuations in the trading price of bonds. Long bonds command a “liquidation risk premium” over short bonds, because they may have to be liquidated before maturity – following a bad idiosyncratic shock – precisely when their resale value is low – due to the simultaneous occurrence of a bad aggregate shock. Our framework endogenously generates limited cross-sectional wealth heterogeneity among the agents (despite the presence of uninsured idiosyncratic shocks), which allows us to characterise analytically the shape of the entire yield curve, including the yields on bonds of arbitrarily long maturities. Agentsʼ desire to hedge the idiosyncratic risk together with their fear of having to liquidate long bonds at unfavourable terms implies that a greater bond supply raises the level of the yield curve, while an increase in the relative supply of long bonds raises its slope.

In this thesis, we propose to study the interactions between climate and fiscal policies, within a unified framework that takes into account the dynamics of state indebtedness, intergenerational trade-offs, and the existence of sectoral disparities. First, we identify the issues surrounding the success of an environmental fiscal reform and the structural conditions influencing the success of such a reform. We then approach the problem through a modeling exercise that allows us to address the intergenerational and sectoral impacts of different designs of environmental tax reforms in the French case. In particular, it appears that taxing final energy as an intermediate factor of production, combined with a reduction in the tax burden on labor, allows us to limit relatively more the costs associated with climate policy. Finally, in the last section we focus on the electricity sector and the consequences of different climate and fiscal policy scenarios in terms of production costs for this sector. We show that if the pressure on public finances does not subside, the increase in financing costs could be unfavorable to the renewal of the electricity fleet in favor of decarbonized technologies such as renewable energies. Thus, through macro-economic and sectoral approaches, this thesis illustrates the trade-off that governments could face regarding the recycling of green tax revenues in climate policy.

This thesis focuses on the measurement and determinants of stock price volatility. The first part begins by assessing, using time series econometric analysis, the magnitude and persistence of cyclical stock price fluctuations. We then present the main financial anomalies (notably excessive price volatility and predictability of returns) in a unified and synthetic framework. The analysis leads us to relativize the scope of the informational efficiency hypothesis of the markets, and to emphasize the need to explain the large variations in the discount rate that cause the price movements. The second part of the thesis proposes a theoretical model, based on the notions of equilibrium indeterminacy and self-fulfilling prophecy, capable of accounting for the stylized facts thus identified. Using two simple asset pricing models, we show that a large number of financial anomalies, far from demonstrating the irrationality of markets, can be explained by the multiplicity of equilibria that can appear in rational expectations models.