time preferences and mortgage choice abstractmortgage decisions have important consequences for consumers lenders and the state of the economy more generally mortgage decisions are also prototypical of consumer financial choices that involve a stream of expenditures and consumption occurring across time the authors use heterogeneity in time preferences for both immediate present bias and long term outcomes to explain a sequence of mortgage decisions including mortgage choice and the decision to abandon a mortgage the authors employ an analytic model and a survey of mortgaged households augmented by zip code level house price and foreclosure data the model suggests and data confirm that consumers with greater present bias and long term discounting tend to choose mortgages that minimize up front costs however greater present bias decreases homeowners willingness to abandon a mortgage locking them into the contract long term patience increases mortgage abandonment this reversal across mortgage decisions is difficult for alternati

aid and exchange rate adjustment in african trade liberalisations most african governments must except for short periods of time set macroeconomic policies which are compatible that is trade restrictions the exchange rate and budgetary cum monetary policy must be coordinated in such a way as to avoid depletion of foreign exchange reserves often the potential for departure from compatibility is minimal for example for some years the tanzanian economy was run with reserve cover of only a few days of imports 2 trade liberalisation must therefore involve continuous coordination with other policies so as to maintain compatibility one theoretical possibility is for a gradual creep towards liberalisation with coordination achieved by ex post fine tuning however recent surveys of numerous non african trade liberalisations papageorgiou et al i99i conclude that large abrupt liberalisations have proved more sustainable apart from economic considerations it is quite possible that for political reasons gradual trade liberalisation is not feasible in africa transient political windows of opportunity are either seized with an abrupt liberalisation or missed altogether further donors may insist on liberalisation being abrupt such a liberalisation starkly poses the coordination problem and this paper uses a simple computable general equilibrium model cge to explore alternative compatible strategies in an africa type economy the essence of the compatibility problem can be seen by considering the consequence of a liberalisation in which no other policies are changed the reduction of tariffs or more commonly the relaxation of quotas will lower the domestic price of importable goods and thereby reduce the demand for money 3 being a stock effect in the short term this will dominate any changes in the money supply brought about by the fiscal implications of liberalisation since these are flow effects hence there will be an excess supply of money and so a payments deficit the paper investigates three alternative strategies which prevent such an outcome each maintaining compatibility the first section 2 is to achieve an offsetting increase in the demand for money through devaluation the second section 3 is to use programme aid to finance a deficit until the money supply is sufficiently depleted these two extremes respectively characterise the post i986 nigerian trade liberalisation and all

indonesian agricultural development in comparative perspective abstract in both the late colonial and the early post independence periods most observers of the indonesian economy were pessimistic about the prospects for agricultural and especially foodcrop growth but over the last 15 years food production growth in indonesia has been among the fastest in the world this paper examines the reasons for the accelerated growth and reviews some of the literature on its distributive consequences comparisons are made with other episodes of accelerated agricultural growth in recent asian history especially that of meiji japan it is shown that there are remarkable similarities between agricultural development indicators in indonesia in the 1960s and 1970s and those in meiji japan the challenge for indonesian policy makers in the future will be to build on the agricultural successes of the past two decades in order to create a more diversified economy and ensure sustained economic development

individual risk attitudes measurement determinants and behavioral consequences this paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects homes using a question asking people about their willingness to take risks in general we find that gender age height and parental background have an economically significant impact on willingness to take risks the experiment confirms the behavioral validity of this measure using paid lottery choices turning to other questions about risk attitudes in specific contexts we find similar results on the determinants of risk attitudes and also shed light on the deeper question of stability of risk attitudes across contexts we conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks occupational choice and smoking the question about risk taking in general generates the best all round predictor of risky behavior

structural adjustment and african industry over the years many analysts have despaired of the effects of structural adjustment on the economies of sub saharan africa the ability of these economies to respond positively to exposure to market liberalisation has been weak and faltering the weakness of the african supply response has been particularly marked in manufacturing industry and manufactured export performance even the world bank the main architect of adjustment programmes has at times shown disappointment with the failure of its recipes though it has remained doggedly optimistic however its latest report on adjustment in africa world bank 1994 comes to rather optimistic conclusions on the impact of adjustment especially on industry thus adjustment in africa starts as follows in the african countries that have undertaken and sustained major policy reform adjustment is working 2 it finds that the countries that had the most improvements in policies had the strongest increases in gdp growth and that the increase in their industrial and export growth rates was even more striking in view of the past debate on the effects of structural adjustment in africa3 following the established convention the discussion of africa covers sub saharan africa excluding south africa these findings are important and deserve scrutiny

looking behind mortgage delinquencies abstract delinquency rates for mortgages originated before and after the financial crisis are examined using a novel and large panel obtained by merging data from tax records and credit registers first we estimate the selection into the mortgage market using an exogenous index of local credit supply as exclusion restriction second controlling for selection we estimate the impact of income shocks on the delinquency rate we find that since 2008 the selection process has led to the halving of the delinquency rate conditional on the creation of a new mortgage job losses nearly double the delinquency risk estimates uncorrected for selection are severely downward biased

poverty and income distribution during adjustment issues and evidence from the oecd project drawing lessons from country studies the authors examine the effects of adjustment policies on the distribution of income in chile cote d ivoire ecuador indonesia malaysia and morocco after analyzing the issues that must be confronted in designing adjustment programs with a focus on poverty they synthesize the main conclusions of the different country studies with simulation exercises they explore the effects of the design of the adjustment packages on poverty and on the sustainability of the measures undertaken in these countries these exercises show considerable diversity in the evolution of income distribution during adjustment they also expose the fatal flaws of narrowly designed adjustment programs adjustment programs whether focused on efficiency or on welfare will fail when they do not recognize the interdependence of the three criteria of efficiency welfare and political feasibility adjustment programs must be carefully packaged to fit country circumstances taking into account both the political and economic environments

securitization and distressed loan renegotiation evidence from the subprime mortgage crisis abstract we examine whether securitization impacts renegotiation decisions of loan servicers focusing on their decision to foreclose a delinquent loan conditional on a loan becoming seriously delinquent we find a significantly lower foreclosure rate associated with bank held loans when compared to similar securitized loans across various specifications and origination vintages the foreclosure rate of delinquent bank held loans is 3 to 7 lower in absolute terms 13 to 32 in relative terms there is a substantial heterogeneity in these effects with large effects among borrowers with better credit quality and small effects among lower quality borrowers a quasi experiment that exploits a plausibly exogenous variation in securitization status of a delinquent loan confirms these results

the determinants of atmospheric so2 concentrations reconsidering the environmental kuznets curve this analysis explores the effects of income and the spatial intensity of economic activity on the atmospheric concentration of sulfur dioxide the results indicate that there is a u shaped relation between income and atmospheric concentration of so2 and an inverted u shaped relation between the spatial intensity of economic activity and so2 concentrations these results suggest that the spatial intensity of economic activity rather than income provides the impetus for policies and technologies that reduce so2 emissions based on this result the atmospheric concentration of so2 in developing nations may decline faster than indicated by previous analyses the potential for this decline depends on the rate at which income grows relative to population the trade off between the effects of income gains and the spatial intensity of economic activity on the atmospheric concentration of so2 is consistent with the notion that some environmental problems can be ameliorated by slowing population growth and increasing income levels

the impact of structural adjustment programs on manufacturing lessons from nicaragua abstract since 1988 nicaragua has applied structural adjustment programs including stabilization and liberalization measures as of 1991 these measures succeeded in combating inflation but they did not lead to increased production nor to an improved trade balance the nicaraguan manufacturing sector was especially vulnerable because of a decade long lack of investment and the non market environment in which firms operated in the 1980s the combination of trade liberalization with an overvalued exchange rate and financial liberalization had in particular negative effects on manufacturing production and investment in addition specific industrial policies are necessary to increase manufacturing competitiveness

exchange rate fiscal and agricultural policies in africa does adjustment hurt the poor abstract trade exchange rate fiscal and agricultural sector policy reforms are the pillars of structural adjustment programs in africa results indicate that trade and exchange rate reforms are associated with a large decline in economic rents and a shift in relative prices that favor the rural and urban poor fiscal reforms have not brought about draconian belt tightening measures although the incidence of public spending particularly in the social sectors and in terms of public sector employment remains far from progressive reduction of export crop taxation contributes to higher incomes for the poor and domestic food crop liberalization has not led to increases in purchase prices of staple commodities for most low income households

the determinants of attitudes towards strategic default on mortgages we use survey data to measure households propensity to default on mortgages even if they can afford to pay them strategic default when the value of the mortgage exceeds the value of the house the willingness to default increases in both the absolute and the relative size of the home equity shortfall our evidence suggests that this willingness is affected by both pecuniary and non pecuniary factors such as views about fairness and morality we also find that exposure to other people who strategically defaulted increases the propensity to default strategically because it conveys information about the probability of being sued

impacts of monetary and macroeconomic factors on food prices in eastern and southern africa eastern and southern africa has been experiencing relatively large increases in real food prices since the early 1980s real food prices in some african countries grew as much as 11 per year during the 1980 1996 period the huge volatility in food prices coincided with the implementation of structural adjustment programmes in several african countries this study examines the impacts of monetary and macroeconomic factors on real food prices in eastern and southern africa using the technique of cointegration and error correction modelling to test the long run relationship between real food prices and the factors that influence their behaviour in selected african countries demand elasticities for food are estimated for selected countries the empirical results show that changes in domestic food production coupled with income trade exchange rate and monetary policies have significant impacts on real food prices with wide implications for food availability and food security in the region

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

the imf the world bank and africa s adjustment and external debt problems an unofficial view abstract sub saharan african development in the 1990s will require significant increases in transfers and debt relief from external official sources negotiation of conditions for assistance imposes heavy costs upon recipients once gross macroeconomic distortions are overcome the risk of program failure from uncertainty and underfunding typically excceds that from absence of further policy reforms the effects of which are unproven the relative influence of the international monetary fund imf and world bank in african programs has grown too large the imf transferring resources out of the region should retreat to a technical advisory role the world bank should develop contingency financing and cooperation with other sources of advice and finance

has recovery begun africa s adjustment in the 1980s revisited this article reviews the 1989 debate between the world bank and the economic commission for africa over africa s adjustment and on the basis of most recent statistics concludes that there is little evidence that the region is in throes of a recovery some countries however did relatively better than others in the 1980s and an attempt is made to account for differences in performance it is concluded that success in adjustment results not from world bank international monetary fund programs as such but rather from policy coherence accompanied by healthy movement in key variables namely the real exchange rate and public development expenditure

how should structural adjustment programs be designed abstract more than seven years have elapsed since the onset of the generalized debt crisis of 1982 yet the affected countries have still not managed to stabilize their economies these countries must now attempt structural adjustment in the midst of pervasive macroeconomic and political instability structural adjustment packages should be designed with this reality in mind this paper argues that structural adjustment programs should strive for sustainability rather than the economic liberalization that they presently stress illiberal policies which do not damage overall macro stability are preferable to liberal policies which are inherently unsustainable or engender macro instability liberalization programs that are not sustainable are likely to bring few benefits but have high costs in terms of private investment the paper discusses some of the chief implications of this opinion for the design of adjustment programs

the ghanaian manufacturing sector 1991 95 firm growth productivity and convergence the removal of high levels of protection combined with substantial real devaluations have changed the environment in which ghanaian manufacturing firms have operated in the 1990s the changes in output composition and productivity which have occurred over this period are examined in this article survey evidence for the growth of the sector is shown to be consistent with data from sales tax returns analysis of the panel survey shows that in a comparative context the rate of job creation in ghana s manufacturing sector is high this rate is highest in medium sized firms small firms have not grown more rapidly than larger firms there has been no underlying growth in technical efficiency and output growth has been matched by a commensurate growth in labour and capital inputs labour productivity differs substantially by firm size due primarily to differences in physical not human capital endowments

economic reform and political transition in africa the quest for a politics of development the 1980s were bracketed by crises in africa as protracted economic malaise was succeeded by a wave of political reform analysts have sought to understand the sources of economic decline as well as the political requisites for recovery in the region neoclassical and structuralist analyses have been challenged by state centric views of economic change the latter perspective emphasizes the need for capable developmental states as a basis for long term adjustment but a political theory of economic change is still lacking such a theory must address the institutional foundations of growth as well as the shifting basis of social coalitions in african regimes political liberalization suggests the possibility of a new setting for economic reform though the effects of political reform on institutions and coalitions remain ambiguous and democratization cannot be regarded as a panacea for the region s developmental failure future research must look more closely at the interests and structures in transitional regimes and scholars should adopt a more comparative vantage on africa s challenges of reform

the household bankruptcy decision personal bankruptcy filings have risen from 0 3 percent of households per year in 1984 to around 1 35 percent in 1998 and 1999 transforming bankruptcy from a rare occurrence to a routine event lenders lost about 39 billion in 1998 due to personal bankruptcy filings but economists have little understanding of why households file for bankruptcy or why filings have increased so rapidly until very recently studying the household bankruptcy decision was very difficult because no household level data set existed that included information on bankruptcy filings in this paper we use new data from the panel study of income dynamics which includes information on bankruptcy filings to estimate a model of households bankruptcy decisions we find support for the strategic model of bankruptcy which predicts that households are more likely to file when their financial benefit from filing is higher our model predicts that an increase of 1 000 in households financial benefit from bankruptcy would result in a 7 percent increase in the number of bankruptcy filings our model also predicts that if the 1997 national bankruptcy review commission s proposed changes in bankruptcy exemption levels were implemented there would be a 16 percent increase in the number of bankruptcy filings each year but if the 100 000 cap on homestead exemptions recently passed by the u s senate were adopted our model predicts that there would be only a negligible effect on the number of filings we find little support for the nonstrategic model of bankruptcy which predicts that households file when adverse events occur which reduce their ability to repay finally controlling for state and time fixed effects our model shows that households are more likely to file for bankruptcy if they live in districts with higher aggregate filing rates

forced sales and house prices the market for housing differs in several important ways from the textbook model of a liquid asset market with exogenous fundamentals this implies that the price at which a house is sold can be influenced not only by general supply and demand conditions but also by idiosyncratic factors including the urgency of the sale and the effects of the ownership transfer on the physical quality of the house first houses are productive only when people are living in them owning an empty house is equivalent to throwing away the dividend on a financial asset second houses are fragile assets that need maintenance and are vulnerable to van dalism unoccupied houses are particularly vulnerable and expensive to protect third short term rental contracts involve high transactions costs resulting from the moving costs of renters and the need of homeowners to protect their property against damage fourth houses are expensive indivisible and heterogeneous assets each house has certain unique characteristics which are likely to appeal to certain poten tial buyers and not to others so selling a house requires matching it with an appro priate buyer because of the high costs of intermediation in housing this task is normally undertaken by a real estate broker rather than a dealer fifth most home owners must finance their purchases using mortgages collateralized debt contracts that transfer home ownership to the mortgage lender through a foreclosure process if the homeowner defaults the expansion of mortgage credit in the early 2000s and the recent decline in house prices have led to an unprecedented increase in foreclosures since 2006 foreclosures transfer houses to financial institutions which must maintain and pro tect them until they can be sold foreclosed houses are likely to sell at low prices both because they may have been physically damaged during the foreclosure pro cess and because financial institutions have an incentive to sell them quickly in a liquid market an asset can be sold rapidly with a minimal impact on its price but

assessing adjustment in africa abstract in 1994 the world bank issued a report on structural adjustment adjustment in africa in which it was argued that orthodox macroeconomic management represented the road to economic recovery for the sub saharan countries this article demonstrates that with its heavy emphasis upon macroeconomic policy bank policy shifts from structural adjustment to stabilization second the statistical evidence presented by the bank is analyzed and shown to be neither convincing nor internally consistent finally an alternative approach to adjustment stabilization is proposed and subjected to statistical testing

the gender dimensions of economic adjustment policies potential interactions and evidence to date abstract many developing countries have implemented stabilization and structural adjustment programs over the last 20 years the success of these programs depends critically on individual level responses to changing economic incentives access to control of and an ability to move productive economic resources between sectors is determined in part by gender if an individual s gender impedes their ability to fully participate in the economic adjustment process by inhibiting resource access control or movement adjustment will be impaired this paper discusses the potential gender dimensions of structural adjustment policies and examines the evidence to dale

should i default on my mortgage even if i can pay experimental evidence abstract we study strategic default in the laboratory i e in a controlled experiment subjects are initially endowed with a house and a mortgage we use neutral wording in the experiment and must decide at each period in which their mortgage is alive among three options making the mortgage payment selling the house or walking away from their house and defaulting on their mortgage at each point in time we can observe whether defaulters can afford to make the mortgage payment and thus directly compute the number of strategic defaulters subjects default in the right periods and quite fast learn what they should consume we find experimental support for the double trigger hypothesis individuals faced with low income and low house prices are more likely to default we observe that subjects default less than optimal and this decision is significantly affected by social norm concerns in the context of the experiment individuals under consume in the first periods of life they are cautious when indebted both introducing a 50 probability of recourse and a responsible homeowner reward are very effective in preventing default in the lab especially by individuals receiving a bad shock to income when house prices are low

negative equity and foreclosure theory and evidence abstract recent declines in housing prices have focused attention on the relationship between negative housing equity and mortgage default theory implies that negative equity is a necessary condition for default but not a sufficient one this often misunderstood result is clearly illustrated in a dataset of massachusetts homeowners during the early 1990s fewer than 10 percent of borrowers likely to have had negative equity at the end of 1991 experienced a foreclosure during the following three years an econometric model of default estimated on two decades of massachusetts housing data also predicts low default rates for current negative equity borrowers we develop a simple theoretical model to interpret these empirical findings and to assess potential foreclosure reduction policies our results imply that lenders and policymakers face an information problem in trying to help borrowers with negative equity because it is hard to determine which owners really need help in order to stay in their homes

house price beliefs and mortgage leverage choice we study the relationship between homebuyers beliefs about future house price changes and their mortgage leverage choices whether more pessimistic homebuyers choose higher or lower leverage depends on their willingness and ability to reduce the size of their housing market investments when households primarily maximize the levered return of their property investments more pessimistic homebuyers reduce their leverage to purchase smaller houses on the other hand when considerations such as family size pin down the desired property size pessimistic homebuyers reduce their financial exposure to the housing market by making smaller downpayments to buy similarly sized homes to determine which scenario better describes the data we investigate the cross sectional relationship between house price beliefs and mortgage leverage choices in the u s housing market we use plausibly exogenous variation in house price beliefs to show that more pessimistic homebuyers make smaller downpayments and choose higher leverage in particular in states where default costs are relatively low as well as during periods when house prices are expected to fall on average our results highlight the important role of heterogeneous beliefs in explaining households financial decisions