Enisse Kharroubi

Bank for International Settlements
Monetary and Economic Department
Macroeconomic Analysis Division
Office T.08.034
Centralbahnplatz 2
CH-4051 Basel, Switzerland
phone: + 41 (0) 61 280 9250
email: enisse.kharroubi''at''bis.org or ekharroubi''at''gmail.com (at=@)

I am currently Senior Economist in the Macroeconomic Analysis Division in the Monetary and Economic Department of the Bank for International Settlements. Prior to that, I served as an economist in the International Macroeconomics Division (International Affairs Department) at Banque de France. I hold a Ph.D. in Economics from the Paris School of Economics(PSE 2004).

My main areas of research are Macroeconomics, Financial Economics and International Finance.

Macroeconomics

Fiscal Policy

Abstract: What are the effects of cyclical fiscal policy on industry growth? We show that industries with a relatively heavier reliance on external finance or lower asset tangibility tend to grow faster (in terms of both value added and of labor productivity growth) in countries that implement fiscal policies that are more countercyclical. We reach this conclusion using Rajan and Zingales׳s (1998) difference-in-difference methodology on a panel data sample of manufacturing industries across 15 OECD countries over the period 1980–2005.

Monetary Policy

Abstract: This paper analyses the effectiveness of monetary policy during downturns associated with financial crises. Based on a sample of 24 developed countries, our empirical analysis suggests that monetary policy is less effective following a financial crisis as the monetary transmission mechanism is partially impaired. In particular, our results suggest that the benefits of accommodative monetary policy during a downturn are elusive when the downturn is associated with a financial crisis. In addition, we find that private sector deleveraging during a downturn helps to induce a stronger recovery.

Abstract: In this paper, we use cross-industry, cross-country panel data to test whether industry growth is positively affected by the interaction between the reactivity of real short term interest rates to the business cycle and industry-level measures of financial constraints. Financial constraints are measured, either by the extent to which an industry is prone to being "credit constrained", or by the extent to which it is prone to being "liquidity constrained". Our main findings are that: (i) the interaction between credit or liquidity constraints and monetary policy countercyclicality, has a positive, significant, and robust impact on the average annual rate of labor productivity in the domestic industry; (ii) these interaction effects tend to be more significant in downturns than in upturns.

You can find an extensively revised version of this paper here.

Economic Fluctuations

Abstract: How do volatility and liquidity crises affect growth? When credit is constrained, a bias toward short-term debt can arise in financing long-term investments, generating maturity mismatches and leading potentially to liquidity crises. The frequency of liquidity crises (“abnormal” volatility) and the volatility of growth (“normal” volatility) are found to have independent negative effects on growth. Financial development however dampens the growth cost of volatility, but only in the case of normal volatility. The growth cost of volatility therefore depends critically on the composition of normal and abnormal volatility, the latter being more costly for growth.

Abstract: in preparation.

Pour l'instant c'est un peu vide, mais revenez dans 2-3 jours quand j'aurai appris un peu plus de choses,
je vous assure que vous allez être surpris !

Labor Market

Abstract: This paper addresses risk sharing on the labor market. It first provides empirical evidence that, every thing else equal, real compensation per worker growth is more sensitive to changes in output growth in economies where the volatility of output growth is larger. Secondly the paper shows that this can be accounted for in a framework where firms are confronted to imperfect capital markets. In this case, compensation insurance can have a negative effect on firm borrowing capacity. Then with risk averse workers, a trade-off appears for firms between the cost of labor and the intensity of borrowing constraints. Finally when embedded in a general equilibrium model, we show that the optimal labor contract displays fewer insurance, the larger the volatility of shocks on firm production function.

Abstract: This paper studies how the design of labor contracts affects productivity growth in the presence of credit constraints. Assuming that firms and workers face imperfect capital markets, flexibility in labor contracts is shown to have three effects. It first contributes to relax firm credit constraints. Second it positively influences workers precautionary savings and thereby raises the volume of global savings. Finally it modifies firm incentives to make more risky and hence more productive investments. Based on these three effects, the model brings two results. First the economy can exhibit multiple equilibria when capital market imperfections are large, the high flexibility equilibrium being always Pareto dominated. Second the model predicts that productivity growth should be positively associated with labor market flexibility for relatively low levels of capital market imperfections. We provide empirical evidence at the industry level which supports this last conclusion.

Financial Economics

Liquidity and Financial Crises

  1. Liquidity, Moral Hazard, and Interbank Market Collapse? joint with Edouard Vidon

Abstract: This paper proposes a framework to analyze the functioning of the interbank liquidity market and the occurrence of liquidity crises. The model relies on three key assumptions: (i) ex ante investment in liquid assets is not verifiable - it cannot be contracted upon, (ii) banks face moral hazard when confronted with liquidity shocks - unobservable effort can help overcome the shock, and (iii) liquidity shocks are private information - they cannot be diversified away. Under these assumptions, the aggregate volume of capital invested in liquid assets is shown to exert a positive externality on individual decisions to hoard liquid assets. Due to this property, the collapse of the interbank market for liquidity is an equilibrium. Moreover, such an equilibrium is more likely when the individual probability of the liquidity shock is lower. Banks may therefore provision too few liquid assets compared with the social optimum.

  1. Liquidity Squeeze, Abundant Funding and the Great Moderation.

Abstract: This paper studies the choice between building liquidity buffers and raising funding ex post, to deal with liquidity shocks. We uncover the possibility of a inefficient liquidity squeeze equilibrium. Agents typically choose to build less liquidity buffers when they expect cheap funding. However, when agents hold less liquidity buffers in the aggregate, they can raise less funding because of limited pledgeability, which depresses the funding cost. This incentive structure yields multiple equilibria, one being an inefficient liquidity squeeze equilibrium where agents do not build any liquidity buffer. Comparative statics show that this inefficient equilibrium is more likely when the supply for funding is large, and/or when aggregate shocks display low volatility. Last the effectiveness of policy options to restore efficiency is limited because the net gain to intervention decreases with the availability of funding. In other words, policy becomes ineffective when the equilibrium becomes inefficient.

Financial Development and Financial Sector Growth

  1. Reassessing the Impact of Finance on Growth. joint with Stephen Cecchetti

Abstract: This paper investigates how financial development affects aggregate productivity growth. Based on a sample of developed and emerging economies, we first show that the level of financial development is good only up to a point, after which it becomes a drag on growth. Second, focusing on advanced economies, we show that a fast-growing financial sector is detrimental to aggregate productivity growth.

  1. Why does Financial Sector Growth Crowd Out Real Economic Growth? joint with Stephen Cecchetti

Abstract: In this paper, we examine the negative relationship between the rate of growth of finance and the rate of growth of total factor productivity. We begin by showing that by disproportionately benefiting high-collateral/low-productivity projects, an exogenous increase in finance reduces total factor productivity growth. Then in a model with skilled workers and endogenous financial sector growth, we establish the possibility of multiple equilibria. In the equilibrium where skilled labour works in finance, the financial sector grows more quickly at the expense of the real economy. We go on to show that consistent with this theory, financial growth disproportionately harms financially dependent and R-D intensive industries.

Banking Regulation

Abstract: This paper investigates the interplay between cyclical monetary policy and fi…nancial regulations on industry growth. We lay down a model where …firms are endowed with long-term -productivity enhancing- projects whose returns are not fully pledgeable and subject to aggregate productivity shocks. In this model, lower pledgeability fi…rms grow disproportionately faster when real interest rates are more countercyclical or when credit provision is more countercyclical. Moreover, the growth ect of countercyclical interest rates is reduced when the fi…nancial sector is more constrained in its ability to provide credit. The paper then tests these predictions using cross-country, cross-industry OECD data over the period 1999-2005.

Pour l'instant c'est un peu vide, mais revenez dans 2-3 jours quand j'aurai appris un peu plus de choses, je vous assure que vous allez être surpris !

International Macroeconomics

International Capital Flows

  1. Growth and Foreign Capital.

Abstract: Recent empirical work has shown that over the long run, current account defi…cits are associated with lower growth, especially in developing countries. This paper shows that this can hold in an economy where (i) entrepreneurs of different productivities can raise capital from domestic and foreign financiers and (ii) domestic financiers have a comparative advantage in financing low productivity entrepreneurs. In this framework, low productivity entrepreneurs can outbid higher productivity entrepreneurs on the domestic capital market. When this happens, the economy attracts more capital from abroad but suffers capital misallocation and low total factor productivity as a large part of domestic investment goes to low productivity projects. Introducing workers into the model and allowing for endogenous savings, we show that if the labor share in value added is sufficiently large, aggregate savings and investment are typically lower with larger foreign capital inflows. Finally the paper contrasts financial openness and financial autarky highlighting that the trade-off lies between an enhanced borrowing ability on the one hand and potential capital misallocation as well as reduced savings on the other hand.

International Trade

  1. Some Evidence on the Globalization-Inflation Nexus joint with Sophie Guilloux

Abstract: This paper aims at evaluating the impact of globalization, if any, on inflation and the inflation process. We estimate standard Phillips curve equations on a panel of OECD countries over the last 25 years. We first show that the impact of commodity import price inflation on CPI inflation depends on the volume of commodity imports while the impact of non-commodity import price inflation is independent of the volume of non-commodity imports. Second, focusing on the role of intra-industry trade, we provide preliminary evidence that this variable can account (i) for the low pass-through of import price to consumer price and (ii) for the flattening of the Phillips curve, i.e. the lower sensitivity of inflation to the output gap.

  1. The Trade Balance and the Real Exchange Rate

Abstract: Globalisation has affected the relationship between the trade balance and the real exchange rate in two ways. On the one hand, the growth of trade taking place within industries makes the trade balance more sensitive to real exchange movements. On the other hand, a higher degree of vertical specialisation and more global supply chains act to reduce this sensitivity. The relative importance of these two effects varies across countries. According to the estimates presented in this article, changes in the real exchange rate could play a larger role in curbing the US trade deficit than in reducing the Chinese trade surplus. This confirms that real exchange rate adjustment is only part of the solution for global rebalancing, and needs to be accompanied by other policy actions.