NEW:

• The Economics of Sovereign Debt, Bailouts and the Eurozone, 2023 (revised version), with Pierre Olivier Gourinchas and Todd Messer, IMF Working Paper No. 2023/177, CEPR DP 14891 and NBER No. 27421:  Despite a formal ‘no-bailout clause,’ we estimate significant net present value transfers from the European Union to Cyprus, Greece, Ireland, Portugal, and Spain, ranging from roughly 0.5% (Ireland) to a whopping 43% (Greece) of 2010 output during the Eurozone crisis. We propose a model to analyze and understand bailouts in a monetary union, and the large observed differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic activity, debt-to-gdp ratio, default costs). Our model embeds a ‘Southern view’ of the crisis (transfers did not help) and a ‘Northern view’ (transfers weaken fiscal discipline). While a stronger no-bailout commitment reduces risk-shifting, it may not be optimal from the perspective of the creditor country, even ex-ante, if it increases the risk of immediate insolvency for high debt countries. Hence, the model provides a potential justification for the often decried policy of ‘kicking the can down the road.’ Mapping the model to the estimated transfers, we find that the main purpose of the outsized Greek bailout was to prevent an exit from the eurozone and possible contagion. Bailouts to avoid sovereign default were comparatively modest.

• The Many Channels of Firms' Adjustment to Energy Shocks: Evidence from France, July 2023, with Lionel Fontagné and Gianluca Orefice, CEPR Discussion Paper DP18262 (See The Economist, VOXEU) Based on firm level data in the French manufacturing sector, we find that firms adapt quickly, strongly and through multiple channels to energy shocks, even though electricity and gas bills represent a very small share of their total costs. Over the period 1996-2019, faced with an idiosyncratic energy price increase, firms reduce their energy demand, improve their energy efficiency, increase intermediate inputs imports and optimize energy use across plants. Firms are also able to pass-through the cost shock fully on their export prices. Their production, exports and employment fall. A consequence of these multiple adjustment mechanisms is that the fall in profits is either non-significant, small or specific to only the most energy intensive firms. We also find that the impact of electricity shocks has weakened over time, suggesting that only firms able to adapt their production process to energy cost shocks have survived. Importantly, when faced with large electricity and gas price increases, firms are less able to reduce their consumption. These results shed light on the mechanisms of resilience of the European manufacturing sector in the context of the present energy crisis 

• Les liens complexes et renouvelés entre commerce international et conflits militaires au regard de la guerre en Ukraine avec Thierry Mayer et Mathias Thoenig. Tribune Le Monde 7 février 2023.

• Trade imbalances, fiscal policies  and the rise of protectionism: evidence from G20 countries, revised version (July 2023), with Samuel Delpeuch and Etienne Fize, CEPR Discussion Paper DP15742. We investigate the role of trade imbalances in the rise of protectionism on the period 2009-2019 among G20 countries. Bilateral trade imbalances are robust (with various sets of fixed effects) predictors of protectionist attacks. The evidence on the impact of multilateral trade imbalances is less robust. The role of trade imbalances in the rise of protectionism is confirmed when we instrument trade imbalances by unanticipated government spending shocks. Countries with more expansionary fiscal policies react to the ensuing trade imbalance by a more protectionist trade policy. The role of trade imbalances and fiscal policies in the rise of protectionism is economically significant: a one standard deviation increase in the bilateral trade deficit of a country leads to a 8% rise of protectionist attacks by this country.

• The effect of COVID certificates on vaccine uptake, health outcomes, and the economy, Nature Communications volume 13, Article number: 3942 (2022) with Oliu-Barton, Miquel and Pradelski, Bary S. R. and Woloszko, Nicolas (main authors) and Guetta-Jeanrenaud, Lionel and Aghion, Philippe and Artus, Patrick and Fontanet, Arnaud and Wolff, Guntram B. 

• Repenser les sanctions contre la Russie, Tribune dans le Le Monde avec Béatrice Weber di Mauro, 17 juin 2022

• Revisiting the EU framework: Economic necessities and legal options, CEPR Policy Insight No 114 with Miguel Maduro, Jean-Claude Piris, Jean Pisani-Ferry, Lucrezia Reichlin, Armin Steinbach, Beatrice Weder di Mauro, see also VOXEU column and Tribune Le Monde, December 2021.

• Pour une refonte du cadre budgétaire européen // Reforming the European fiscal framework, April 2021, with Jean Pisani Ferry and Xavier Ragot, Note du Conseil d'Analyse Economique, VOXEU column

• Will Schumpeter catch COVID-19? February 2021, with Mathieu Cros and Anne Epaulard. CEPR DP 15834. VOXEU column. We estimate the factors predicting firm failures in the COVID crisis based on French data in 2020. Although the number of firms filling for bankruptcy was much below its normal level (- 36% compared to 2019) the same factors that predicted firm failures (primarily productivity and debt) in 2019 are at work in a similar way as in 2020. Hence, the selection process, although much reduced, has not been distorted in 2020. At this stage, partial hibernation rather than zombification characterises the selection into firm survival or failure. We also find that the sectoral heterogeneity of the turnover COVID shock (proxied by the change in credit card transactions) has been largely (but not fully) absorbed by public policy support because it predicts little of the probability of bankruptcy at the firm level. Finally, we sketch some potential scenarios for 2021-2022 for different sectors based on our empirical estimates of predictors of firm failures.