Economic Policy and Income Distribution : The case of France since the early 1970s

Abstract : The core of our analysis of the French economy concerns the supremacy of interest rates and government spending as policy instruments in this economy. With the strong increase in interest rates at the beginning of the 1980s, non-financial firms started to demand less credit, whereas French households and other developing economies demanded more. Parallel to these developments, bulls became more abundant in stock markets, the unemployment rate soared and a full process of liberalization ensued. We analyze the consequences of this financialization process and some feasible scenarios in France by means of a Cowles Commission-type model that is in turn based on the stock-flow literature. Particular emphasis is given to distributive and fiscalvariables. The model’s results indicate that (given that French firms are caught in a liquidity trap) the interest rate has lost its power as a policy variable. In contrast, public spending has an important expansionary power.
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Luis Reyes Ortiz. Economic Policy and Income Distribution : The case of France since the early 1970s. Economics and Finance. Université Sorbonne Paris Cité, 2015. English. ⟨NNT : 2015USPCD105⟩. ⟨tel-02166435⟩

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