Research
My current academic researches focus on the causes and consequences of financial instability, climate finance and the macroeconomic consequences of financialization. My main research interests include Monetary, Banking and Financial Economics, Applied Econometrics and Machine Learning, Development Economics, and Economic and Financial History.
Papers
8. Firms' access to finance in resource-based countries and the financial resource curse
with Olivier Damette and Sandrine Kablan
Published in Journal of Comparative Economics, vol. 51(3), pp. 1031-1047
(CNRS : 1, HCERES : A)
Abstract: Using a panel of more than 156 000 firms surveyed in 140 countries over the 2003-2019 period, this paper addresses the issue of the financial resource curse through a new channel that thus far has not been accounted for in the literature, namely, firms' access to finance. To do this, our econometric analysis is based on an original approach combining microeconomic level data on firms' access to finance and macroeconomic level data on countries' level of natural resource rents, with a focus on energy rents (oil, gas and coal). By doing so, we are able to investigate in a more precise and disaggregated way the mechanisms explaining why resource-based countries are associated with less developed financial systems. Using panel regressions, we find significant and robust evidence that firms operating in countries characterized by a high level of natural resource rents suffer from less access to external financing. Moreover, depending on two important transmission channels, namely, the quality of institutions and the extent of supply constraints, we find heterogeneities in the relationship between firms' access to finance and countries' level of natural resource rents. In addition, we show that the countries' level of natural resource rents has a significant and negative correlation with firms' access to finance only for firms that do not operate in the natural resource sector. This provides new evidence of the Dutch disease phenomenon, since the lack of firms' financing can also be an explanation for the atrophy of sectors unrelated to the natural resource sector.
with Alexandru Minea and Marcel Voia
Published in The World Economy, 2022, vol. 45(1), pp. 111-135
(CNRS : 2, HCERES : A)
Abstract: Empirical studies emphasize that higher financial development (FD) amplifies the output cost of banking crises. However, no study has so far investigated the effect of FD on another key dimension of banking crises, namely their duration. We address this issue using a large sample of 96 banking crises in 75 countries over the 1977-2014 period. Our analysis suggests that higher FD is significantly associated with an increase in the duration of banking crises (DBC). Moving from the lowest to the highest FD quintile raises the length of banking crises by 4 to 6 years. This result is robust to a broad range of alternative specifications and is unaffected by unobserved heterogeneity or endogeneity. Finally, we show that the effect of FD on the DBC is subject to non-linearities, and is stronger during the last decade and in developed countries.
6. Does more finance mean more inequality in times of crisis?
with Benjamin Williams
Published in Economic Systems, 2020, vol. 44(4), n°100818
(CNRS: 3, HCERES: B)
Abstract: Many recent empirical studies have shown that both banking crises and financial development (FD) play an important role in understanding the dynamics of income inequality (IncI) over the past few decades. However, to date, no study has investigated the role of FD in the amplification of IncI following banking crises. This paper seeks to address this issue using a sample of 69 banking crises in 54 countries, over the 1977-2013 period. Our analysis suggests that FD is associated with a significant increase in IncI in the aftermath of banking crises. This result is robust to a broad range of alternative specifications and is unaffected by various potential sources of endogeneity. We also show that the relationship between FD and the redistributive consequences of banking crises is not subject to a threshold effect and is stronger for developing countries.
5. Forms of democracy and economic growth volatility
with Alexandru Minea
Published in Economic Modelling, 2019, vol. 81, pp. 594-603
(CNRS: 2, HCERES: A)
Abstract: Using a panel of 140 countries over the 1975-2007 period, we disaggregate democracies across five institutional dimensions (government forms, electoral rules, state forms, number of veto players, and age of democracies), to study the precise forms of democracy that may explain the lower economic growth volatility (EGV) in democracies compared to dictatorships, usually emphasized by the literature. We find that, while all government forms decrease EGV to the same extent, proportional electoral rules outperform majoritarian and mixed electoral rules, suggesting a role for a more inclusive political decision-making process. In addition, EGV is significantly lower in unitary states, suggesting a role for a limited separation of power between the central government and the local authorities, while the effect of the number of veto players and the age of democracies is significant only in developed countries. Consequently, the choice between various forms of democracy may not be neutral for EGV, and, possibly, for countries' development path.
4. Financial development and the occurrence of banking crises
with Alexandru Minea
Published in Journal of Banking and Finance, 2018, vol. 96, pp. 344-354
(CNRS : 2, HCERES : A, FNEGE : 1)
Abstract: We perform an in-depth analysis of the effect of different dimensions of financial development on the occurrence of banking crises. Horse-race estimations carried out on a large dataset of 113 banking crises in 112 countries reveal that the growth of M3/GDP and the level of banks' Credits/Deposits increase the occurrence of banking crises, while the growth and sometimes the volatility of the ratio of banks' assets to the sum of banks' and the Central Bank's assets decrease it. In addition, we do not find a significant effect of banks' Credits/GDP. Finally, we unveil heterogeneities related to nonlinearities in the effect of financial development, the time span for the pre-crisis dynamics of financial development, and the level of economic development. Our results suggest that only some dimensions of financial development are significantly associated with the occurrence of banking crises
3. Classifying non-bank currency systems using web data
with Ariane Tichit and Diego Landivar
Published in International Journal of Community Currency Research, 2016, vol. 20, pp. 24-40
Abstract: This paper develops a new classification of non-bank currency systems based on a lexical analysis from French-language web data in order to derive an endogenous typology of monetary projects, based on how these currencies are depicted on the internet. The advantage of this method is that it by-passes problematic issues currently found in the literature to uncover a clear classification of non-bank currency systems from exogenous elements. Our textual corpus consists of 320 web pages, corresponding to 1,210 text pages. We first apply a downward hierarchical clustering method to our data, which enables us to endogenously derive five different classes and make distinctions among non-bank currency system and between these and the standard monetary system. Next, we perform a similarity analysis. Our results show that all non-bank currency systems define themselves in relation to the standard monetary system, with the exception of Local Exchange Trading Systems.
2. Forms of Democracy and Financial Development
with Pierre Mandon
Etudes et Documents, 2015, n°23, CERDI Working Papers
Abstract: The political economy of finance literature emphasizes the critical role of political institutions in promoting financial development. Related empirical findings highlights a robust positive effect of democratic regimes on financial development compared to dictatorships. However, no study focused so far on identifying the precise political institutions explaining the financial development enhancing effect of democracies. In this paper, we study the effects of disaggregated political institutions on financial development along three institutional dimensions, namely forms of government, electoral rules and state forms. Using a large panel of 140 countries over 1984-2007, we show that institutional details are of crucial importance, since the positive effect of democracies on financial development clearly depends on the precise institutional dimensions at work, namely: parliamentary governments and, to a lesser extent federal states. Thus, our study contributes to the institutional design debate, by showing that the simple promotion of democratic regimes might not be sufficient to foster financial development.
1. Meteorological factors against COVID-19 and the role of human mobility
with Olivier Damette and Stéphane Goutte
Published in PLOS ONE, 2021, vol. 16(6): e0252505
Abstract: In the vein of recent empirical literature, we reassessed the impact of weather factors on Covid-19 daily cases and fatalities in a panel of 37 OECD countries between 1st January and 27th July 2020. We considered five different meteorological factors. For the first time, we used a dynamic panel model and considered two different kinds of channels between climate and Covid-19 virus: direct/physical factors related to the survival and durability dynamics of the virus on surfaces and outdoors and indirect/social factors through human behaviour and individual mobility, such as walking or driving outdoors, to capture the impact of weather on social distancing and, thus, on Covid-19 cases and fatalities. Our work revealed that temperature, humidity and solar radiation, which has been clearly under considered in previous studies, significantly reduce the number of Covid-19 cases and fatalities. Indirect effects through human behaviour, i.e., correlations between temperature (or solar radiation) and human mobility, were significantly positive and should be considered to correctly assess the effects of climatic factors. Increasing temperature, humidity or solar radiation effects were positively correlated with increasing mobility effects on Covid-19 cases and fatalities. The net effect from weather on the Covid-19 outbreak will, thus, be the result of the physical/direct negative effect of temperature or solar radiation and the mobility/indirect positive effect due to the interaction between human mobility and those meterological variables. Reducing direct effects of temperature and solar radiation on Covid-19 cases and fatalities, when they were significant, were partly and slightly compensated for positive indirect effects through human mobility. Suitable control policies should be implemented to control mobility and social distancing even when the weather is favourable to reduce the spread of the Covid-19 virus.
Book chapters
Crise Economique (In French)
Chapter for the book Abécédaire de la rupture, interdisciplinary collection Presses Blaise Pascal, 2019
Working Papers
1. Assessing the distributional consequences of banking crises: is there a significant role for credit-gap?
with Samuel Ligonnière and Jean-Marc Atsebi
Abstract: The empirical literature examining the effects of banking crises on income inequality has been mixed and inconclusive. Building on the robust evidence showing that pre-crisis excesses in private credit play a central role in explaining the output costs of banking crises, our paper aims to link these two fields of research by evaluating the effects of banking crises on income inequality conditional on pre-crisis credit gap. To do so, we apply the Local Projections methodology to a yearly panel of 68 banking crises that occurred in 59 countries over the period 1970-2017. Three key results emerge. First, we show that banking crises lead to a significant increase in income inequality. Second, not all banking crises are the same in terms of distributional consequences: we robustly find that only banking crises preceded by a high credit gap are associated with a significant increase in income inequality. Third, stronger increases in unemployment and decreases in bank credit in the aftermath of banking crises preceded by a high credit gap are two potential transmission channels through which banking crises impact income inequality. These results provide grounds for macroprudential policies that, beyond limiting the amplitude of the financial cycle and the associated risks of financial crises, could also play a key role in reducing the distributional consequences of banking crises.
2. Climate shocks and banking sector stability: evidence from El Niño Southern Oscillation
with Olivier Damette and Maxime Fajeau
Abstract: This study proposes a new ex ante approach to assess the impact of climate shocks on banking sector stability by examining the effect of El Niño Southern Oscillation (ENSO) on banking sector distance-to-default. Using dynamic panel data econometric modeling, we investigate the macroeconomic implications of ENSO-induced climate shocks, such as El Niño and La Niña events, on banking sector stability in 51 countries across three regions particularly exposed to the consequences of ENSO oscillations (East Asia and Pacific, Latin America and the Caribbean, and Sub-Saharan Africa) during the period 2000-2020. Our findings show that the adverse effects of these climate shocks on banking sector stability are unevenly distributed among countries, with more pronounced and robust adverse effects of El Niño events in the short-term, particularly in Latin America and the Caribbean and, to a lesser extent, Sub-Saharan Africa. We also document the short-term adverse effects of La Niña events for Latin American and the Caribbean countries. Further estimates suggest that the increase in non-performing loans is a key transmission channel linking El Niño shocks to banking sector stability. As global warming should intensify the frequency and magnitude of ENSO's cyclical pattern, these findings can help estimate the potential adverse effects of climate change-related natural disasters on banking sector stability and inform future mitigation and adaptation policies.
3. Climate and sovereign risks: the Latin American experience with ENSO events
with Olivier Damette and Julien Thavard
Under review in World Development
(CNRS : 1, HCERES : A)
Abstract: Using monthly panel data over the period 2007-2019 for seven Latin American countries, we empirically test the impact of climate shocks, here ENSO (El Niño Southern Oscillations), on sovereign risk. Local Projections are computed to assess the dynamic response of sovereign spreads to ENSO events. Results show that strong El Niño and La Niña shocks lead to a significant increase in sovereign spreads, but with different timing. Strong El Niño shocks are associated with a significant short-term increase in sovereign spreads, while strong La Niña events are associated with a delayed but significant increase in sovereign spreads after a short-term decrease. Thus, our results suggest a potential asymmetry in the effect of these ENSO events on sovereign risk. We also highlight high volatility in the dynamics of sovereign spreads, which may reflect an overreaction of investors faced with the high degree of uncertainty generated by the economic and financial consequences associated with ENSO events. Complementary time-series estimates suggest that Costa Rica and Peru are especially subject to these effects. Overall, our results provide a warning about the fact that, in the case of Latin American countries, weather shocks associated with strong ENSO events have adverse macroeconomic and financial consequences that can lead to an increase in sovereign risk, hinder their government's ability to act as a 'climate rescuer' of last resort, and may be aggravated in the future by climate change.
Works in Progress
Papers
1. Combining econometric and machine learning models to improve the prediction of banking crises (with Sophie Béreau)
2. An anatomy of the financial cycle (with Samuel Ligonnière and Maximilien Coussin)
3. Quantifying excess of finance: implications for economic growth and financial stability (with Sophie Béreau)
4. Assessing the asset prices-economic growth relationship: is there a significant role for the debt level?
5. Does financialization shape the performance and stability of the banking sector? (with Maxime Fajeau)
6. Assessing the impact of climate physical risks on banking sector stability: the Latin American experience with ENSO events (with Olivier Damette and Julien Thavard)
7. Climate physical risks and banking sector stability: evidence from the US (with Olivier Damette, Maxime Fajeau and Rémi Generoso)
8. Assessing the non-linear relationship between financial development and the occurrence of banking crises
Books
1. A history of financial systems and their crises
2. Causes and consequences of financialization: insights from historical and theoretical perspectives