IMF Working Papers

IMF Working Papers
Journal
Publisher:
International Monetary Fund
ISSN:
1018-5941
The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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France in the Global Economy : A Structural Approximate Dynamic Factor Model Analysis

France in the Global Economy : A Structural Approximate Dynamic Factor Model Analysis
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Journal Issue
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Volume/Issue:
2007/129
Series:
IMF Working Papers
Author(s):
Francisco Nadal De Simone, and Alain Kabundi
Publisher:
INTERNATIONAL MONETARY FUND
Published Date:
June 2007
DOI:
http://dx.doi.org/10.5089/9781451866933.001
ISBN:
9781451866933
ISSN:
1018-5941
Page:
45
This study identifies the main shocks that cause fluctuations in French output and their channels of transmission. It uses a large-dimensional structural approximate dynamic factor model. There are three main findings. First, common shocks, especially demand shocks, which seem to originate from the U.S., play an important role in explaining French economic activity. While international trade, relative prices, and FDI flows are the main channels of transmission, the stock market, consumer confidence, and interest rates also matter. Second, France's integration with the rest of the world has increased over time. Third, there is some tentative evidence of regional components in explaining French output fluctuations; countryspecific components also contribute. The predominance of exogenous factors affecting French output, the asymmetry in the transmission of shocks, and France's participation in a currency area, argue for making French goods, services, and labor markets as flexible as possible.
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