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Rue de la Banque

Rue de la Banque No 14: Land prices, lending to companies and job creations

The fluctuations of the value of land held by French firms present a very similar pattern to those of both investment and employment. This Rue de la Banque presents a model in which firms face imperfect labour and credits markets. Due to a collateral constraint for credit, the market value of land in firms’ balance sheets plays an important role in etermining how much they can borrow, and thus affects their investment levels and hiring decisions. The empirical results confirm he predictions of the theoretical model. Fluctuations in land prices had an impact on the business cycle and on the dynamics of the labour market in France.

This letter presents the findings of research carried out at the Banque de France. The views expressed in this post are those of the authors and do not necessarily reflect the position of the Banque de France. Any errors or omissions are the responsibility of the authors.


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Focus n°14

Focus n°14

French households channelled more savings into regulated products than market-based investments

French household savings stood at the same level in 2014 as in 2000. Between these two dates, real estate investment was almost stable while financial savings rose sharply before falling back to their initial level. The main beneficiaries were products with favourable tax treatments and regulated returns (regulated savings accounts, housing savings plans and life insurance contracts).

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François Villeroy de Galhau, Governor of the Banque de France

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