Report
Patrick Artus

The issue of the efficiency of demand policies is again being raised in France

The French government has just decided to implement demand-stimulating policies: Increase in tax-exempt wages for companies that have the capacity to pay them; Government transfer payments to low-income individuals, tax cuts. Moreover , the fall in the oil price will lead to a decline in inflation and an increase in household purchasing power. Dem and for goods and services will therefore get a major boost in France in 2019. This once again raises the question of the efficiency of demand stimulation, at a time when France is suffering from supply constraints that are reducing the reaction of domestic production to increased demand: Poor cost competitiveness; Shortfall in production capacity; Major hiring difficulties; Low labour force skills. To what extent will activity be nefit from the stimulation of demand? We estimate that a 1% increase in aggregate demand in volume terms leads to a 0.55% increase in real GDP, which nevertheless translates into marked stimulation of growth in 2019.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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