Dufrénot

Publications

Quantile and Copula Spectrum: A New Approach to Investigate Cyclical Dependence in Economic Time SeriesBook chapterGilles Dufrénot, Takashi Matsuki and Kimiko Sugimoto, In: Recent Econometric Techniques for Macroeconomic and Financial Data, Gilles Dufrénot and Takashi Matsuki (Eds.), 2021-01, Volume 27, pp. 3-34, Springer, 2021

This chapter presents a survey of some recent methods used in economics and finance to account for cyclical dependence and account for their multifaced dynamics: nonlinearities, extreme events, asymmetries, non-stationarity, time-varying moments. To circumvent the caveats of the standard spectral analysis, new tools are now used based on copula spectrum, quantile spectrum and Laplace periodogram in both non-parametric and parametric contexts. The chapter presents a comprehensive overview of both theoretical and empirical issues as well as a computational approach to explain how the methods can be implemented using the R Package.

Quantile and Copula Spectrum: A New Approach to Investigate Cyclical Dependence in Economic Time SeriesBook chapterGilles Dufrénot, Takashi Matsuki and Kimiko Sugimoto, In: Recent Econometric Techniques for Macroeconomic and Financial Data, Gilles Dufrénot and Takashi Matsuki (Eds.), 2021-01, Volume 27, pp. 3-34, Springer, 2021

This chapter presents a survey of some recent methods used in economics and finance to account for cyclical dependence and account for their multifaced dynamics: nonlinearities, extreme events, asymmetries, non-stationarity, time-varying moments. To circumvent the caveats of the standard spectral analysis, new tools are now used based on copula spectrum, quantile spectrum and Laplace periodogram in both non-parametric and parametric contexts. The chapter presents a comprehensive overview of both theoretical and empirical issues as well as a computational approach to explain how the methods can be implemented using the R Package.

Recent Econometric Techniques for Macroeconomic and Financial DataBookDynamic Modeling and Econometrics in Economics and Finance, Gilles Dufrénot and Takashi Matsuki (Eds.), 2021-01, Volume 27, 387 pages, Springer International Publishing, 2021

The book provides a comprehensive overview of the latest econometric methods for studying the dynamics of macroeconomic and financial time series. It examines alternative methodological approaches and concepts, including quantile spectra and co-spectra, and explores topics such as non-linear and non-stationary behavior, stochastic volatility models, and the econometrics of commodity markets and globalization. Furthermore, it demonstrates the application of recent techniques in various fields: in the frequency domain, in the analysis of persistent dynamics, in the estimation of state space models and new classes of volatility models.
The book is divided into two parts: The first part applies econometrics to the field of macroeconomics, discussing trend/cycle decomposition, growth analysis, monetary policy and international trade. The second part applies econometrics to a wide range of topics in financial economics, including price dynamics in equity, commodity and foreign exchange markets and portfolio analysis. The book is essential reading for scholars, students, and practitioners in government and financial institutions interested in applying recent econometric time series methods to financial and economic data.

Exchange rate policy and external vulnerabilities in Sub-Saharan Africa: nominal, real or mixed targeting?Journal articleFadia Al Hajj, Gilles Dufrénot and Benjamin Keddad, Applied Economics, Volume 53, Issue 3, pp. 380-399, 2021

This paper discusses the theoretical choice of exchange rate regimes in Sub-Saharan African countries that are facing external vulnerabilities. To reduce instability, policymakers choose among promoting external competitiveness using a real anchor, lowering the burden of foreign debt using a nominal anchor or using a policy mix of both anchors. We observe that these countries tend to adopt mixed anchor policies. We solve a state space model to explain the determinants of and the strategy behind this policy. We find that the mixed targeting policy is a two-step strategy: First, monetary authorities choose the degree of nominal exchange rate flexibility according to the velocity of money, trade openness, foreign debt, degree of exchange rate pass-through and exchange rate target zone. Second, authorities seek to stabilize the real exchange rate depending on the degree of competition in the domestic goods market and the degree of foreign exchange intervention. We conclude with regime-switching estimations to provide empirical evidence of how these economic fundamentals influence exchange rate policy in Sub-Saharan Africa.

Risk sharing in Europe: new empirical evidence on the capital markets channelJournal articleGilles Dufrénot, Jean-Baptiste Gosse and Caroline Clerc, Applied Economics, Volume 53, Issue 2, pp. 262-276, 2021

This paper assesses the effectiveness of risk sharing mechanisms in Europe by breaking down the factor income components into their sub-components, and aims to further examine whether financial integration and international portfolio diversification boosts or dampens risk sharing. Using a panel of European countries, we compare the years before and after the 2008 financial crisis. We extend the literature by properly taking into account the heterogeneity (in both country and time dimensions) in the panel through new econometric models. Our results show that financial income has become a major channel of risk sharing in recent years and that a higher integration in the bond and equity markets significantly improves risk sharing in the long term.

Modeling Time-Varying Conditional Betas. A Comparison of Methods with Application for REITsBook chapterMarcel Aloy, Floris Laly, Sébastien Laurent and Christelle Lecourt, In: Recent Econometric Techniques for Macroeconomic and Financial Data, Gilles Dufrénot and Takashi Matsuki (Eds.), 2021-01, pp. 229-264, Springer International Publishing, 2021

Beta coefficients are the cornerstone of asset pricing theory in the CAPM and multiple factor models. This chapter proposes a review of different time series models used to estimate static and time-varying betas, and a comparison on real data. The analysis is performed on the USA and developed Europe REIT markets over the period 2009–2019 via a two-factor model. We evaluate the performance of the different techniques in terms of in-sample estimates as well as through an out-of-sample tracking exercise. Results show that dynamic models clearly outperform static models and that both the state space and autoregressive conditional beta models outperform the other methods.

Unconventional monetary policy reaction functions: evidence from the USJournal articleLuca Agnello, Vitor Castro, Gilles Dufrénot, Fredj Jawadi and Ricardo M. Sousa, Studies in Nonlinear Dynamics & Econometrics, Volume 24, Issue 4, pp. pp18, 2020

We specify unconventional monetary policy reaction functions for the Fed using linear and nonlinear econometric frameworks. We find that nonstandard policy measures are largely driven by the dynamics of inflation and the output gap, with the effect being particularly strong during QE rounds. Moreover, we uncover the presence of asymmetry and regime dependence in central bank’s actions since the global financial crisis, especially concerning the response of the term spread and the shadow short rate to the growth rate of central bank reserves. From a policy perspective and given the lack of a systematic response of monetary policy to asset price growth in nonstandard times, our findings seem to corroborate the view that concerns about asset price bubbles, financial sector pro-cyclicality and systemic risk should be part of the macro-prudential policy toolkit.

Mémoire longue dans les séries financières (Chapitre 2)Book chapterMarcel Aloy, Gilles Dufrénot and Anne Péguin-Feissolle, In: Méthodes de prévisions en finance, A. Charles, O. Darné and L. Ferrara (Eds.), 2020-09, pp. 29-52, 2020
Power-law distribution in the external debt-to-fiscal revenue ratios: Empirical evidence and a theoretical modelJournal articleGilles Dufrénot and Anne-Charlotte Paret, Journal of Macroeconomics, Volume 60, Issue C, pp. 341-359, 2019

This paper provides evidence that the external debt-to-fiscal revenue ratio in emerging countries follows a power-law distribution. Such a distribution reflects the fact that external debt distress or debt crises correspond to extreme events that have been found to happen fairly often. We formally test the hypothesis of a power-law, going further than the usual visual inspection of the distribution of the variable of interest on a doubly logarithmic scale. We also show that such a distribution can be derived from a theoretical model in which uncertainty comes from tax evasion and corruption. Using the framework of an optimal stochastic growth model, we model the external debt-to-fiscal revenue ratio as a diffusion process for which the stochastic steady state distribution is derived using the properties of Itô diffusion processes.

Sovereign debt in emerging market countries: not all of them are serial defaultersJournal articleGilles Dufrénot and Anne-Charlotte Paret, Applied Economics, Volume 50, Issue 59, pp. 6406-6443, 2018

Avoiding to assign emerging market countries a ‘typical’ behaviour, this article considers the heterogeneity across them and through time to predict their sovereign default episodes. Moreover, it focuses on the imbalance between defaulted debt and GDP. For the first time, we use a panel nonlinear regime-switching model whose explanatory factors have a different impact on sovereign default, depending on the regime the country belongs to. We mitigate some common views of the literature (in particular the ‘serial default’ theory) and identify countries deserving to be monitored carefully, because of a higher exposure to sovereign default risk.Abbreviation: CRAG : Credit Rating Assessment Group; EMBI: Emerging Market Bond Index; FSI: Financial Stress Index; GDP: Gross Domestic Product; GFC: Global Financial Cycle; GTD: Gonzalez, Teräsvirta, and V. Dijk; IMF: International Monetary Fund; LM: Lagrange Multiplier; PSTR: Panel Smooth Transition Regression; PTR: Panel Threshold Regression; STAR: Smooth Transition Auto Regressive model; US: United States; VIX: Volatility Index