analysis of the changing influences on traditional households ownership patterns abstract sociological and economic forces have begun to alter ownership patterns in ways not yet captured by movements in the aggregate ownership rate while demographic factors such as marital status and family structure remain influential in determining tenure choice their impact has waned particularly among the best educated households and those with rising real incomes labor market conditions as evidenced by increasing returns to skill are more strongly felt than ever before in the housing market the impact on owning of being highly educated now rivals the influence of being married with minor children increasingly delayed ownership is a reality even for traditional family units with 36 to 45 year old heads that have not prospered in the labor market the rising real cost of even relatively inexpensive suburban housing is also beginning to be reflected in a heightened impact for real family income on tenure choice finally race currently is more adversely influential in determining suburban ownership for young middle aged minority families than it was in 1960 particularly if the household head is not well educated we suspect this is due to racially disparate impacts of increasingly rigorous zoning regulations and higher impact fees in the suburbs

similarities and convergence in g 7 cycles this paper examines the properties of g 7 cycles using a multicountry bayesian panel var model with time variations unit specific dynamics and cross country interdependences we demonstrate the presence of a significant world cycle and show that country specific indicators play a much smaller role we detect di erences across business cycle phases but apart from an increase in synchronicity in the late 1990s find little evidence of major structural changes we also find no evidence of the existence of an euro area specific cycle or of its emergence in the 1990s

inflation and elections theory and evidence for six oecd economies i introduction political business cycle pbc models feature the idea that governments stimulate demand prior to elections in order to improve election prospects while the first generation of pbc models developed by nordhaus 1975 and macrae 1977 assume that voters are naive and retrospective rogoff and sibert 1988 and rogoff 1990 have developed a rational pbc rpbc model where voters are rational and forward looking most empirical studies of political business cycles examine whether unemployment falls the growth rate increases or fiscal and monetary policies become more expansive prior to elections 1 to my knowledge only alesina and roubini 1992 and alesina cohen and roubini 1992 have studied election cycles on inflation based on a large number of elections in 18 oecd countries the authors find evidence of a post election surge in the inflation rate lasting for 3 5 quarters this paper examines whether the existence of election cycles on inflation can be interpreted as supportive evidence of the rpbc theory by focusing on the theory s implications for the relation between post election inflation and the government s re election chances prior to the election in the theoretical part of the paper it is shown that the rpbc theory does not produce unambiguous predictions the functional form of the relation depends on the government s preferences and the election date if electoral terms are fixed or the election takes place close to the mandatory election date average post election inflation will be higher the closer is the election race provided the government always cares about the social costs of election cycles in the empirical part of the paper i generate estimates of the incumbent s election win probability for a sample of 50 elections in six oecd countries three alternative probability series are generated the probability estimates are interacted with dummies turned on after each election and included as regressors in panel data regressions on inflation the three probability series produce the same conclusion the relation between post election inflation and the incumbent s election win probability is hump shaped if the election race is close the inflation rate increases by 0 014 0 018 during the first year after an election i find no indication of an upward jump in inflation after elections when the incumbent s win probability is close to zero or one as noted in the theoretical part of the paper these results are consistent with the rpbc theory the paper is organized as follows the theoretical model is developed in section ii section iii presents the data sample election win probabilities are computed in section iv section v presents the panel data regressions section vi concludes ii theoretical model the theoretical framework is the signalling game developed by persson and tabellini 1990 extended to accommodate the fact that governments always face some uncertainty about the election outcome i first examine a two period game with fixed electoral terms where the election takes place at the end of period one i then consider a three period game where the incumbent chooses whether to call an election in the first or in the second period the output level and the inflation rate in each period t are denoted x sub t and pi sub t respectively pi sub t is determined by the policymaker output is given by the following supply function 1 mathematical expression omitted where mathematical expression omitted are inflation expectations and mu sub t is the policymaker s competence mu sub t is private information for the policymaker and follows a ma 1 process mu sub t eta sub t eta sub t 1 mathematical expression omitted theta with probability 0 5 eta sub t theta with probability 0

housing wealth and consumption growth evidence from a large panel of households this article uses a large panel dataset that tracks the housing wealth and credit card spending of 12 793 individuals in hong kong to study the relationship between housing wealth and household consumption i identify a significant effect of housing wealth on consumption a pure wealth effect can explain part of the sensitivity households with multiple houses have much stronger consumption responses consistent with a relaxation of the credit constraints mortgage refinancing significantly increases households consumption sensitivities however for the majority of the households that do not refinance consumption sensitivity appears to be due to a reduction in precautionary saving jel e21 g21

exploring spatial dynamics with land price indexes the purpose of this study is to explore the within region spatial dynamics of appreciation and depreciation rates using three different representations of geographical space mean value indexing methods are used to construct global land price indexes sub market land price indexes and local land price indexes using transaction price data for vacant residential land within the city of hamilton ontario between 1995 and 2003 the results are validated against statistics canada s series of new housing price indexes followed by a comparison of the relative performance of the three geographical representations of land price indexes the results indicate that the mean value indexing methods are robust although subject to outliers and sample selection bias and clearly illustrate the spatial dynamics of annual appreciation and depreciation rates across the study area the results also underscore the need for regular surveillance of the spatial dynamics of urban land markets

regional uk house price co movement cyclical synchronization of home prices has important implications for monetary and other policies regional house price divergence even over a business cycle can inhibit labour mobility and pr

the impact of transaction costs and the expected length of stay on homeownership abstract economic theory suggests that an increase in the expected length of stay in a dwelling increases the probability of a household choosing to own a house rather than rent this hypothesis is derived from recognition that there are substantial transaction costs associated with homeownership and increased expected time in the home reduces the annualized transaction cost using a military data set we confirm that expected length of stay in a dwelling and the transaction costs of selling are very important to the ownership decision our best estimate of the transaction costs of selling a home are the sum of 3 of house value and 4 of household earnings

fiscal policy and financial market movements abstract this paper estimates fiscal policy reaction function in order to investigate the links between financial market movements and fiscal policy outcomes an increase in asset prices affects in a positive and significant manner primary balances with the response reflecting both an increase in government revenues and a fall in government spending the most important impact on fiscal balances is due to changes in residential property prices changes in equity and commercial property prices are also important determinants of fiscal balances our findings suggest that the steepening of the slope of the yield curve contributes to expenditure based fiscal discipline

bank regulation property prices and early warning systems for banking crises in oecd countries abstract early warning systems ews for banking crises generally omit bank capital bank liquidity and property prices most work on ews has been for global samples dominated by emerging market crises where time series data on bank capital adequacy and property prices are typically absent we estimate logit crisis models for oecd countries finding strong effects from capital adequacy and liquidity ratios as well as property prices and can exclude traditional variables higher capital adequacy and liquidity ratios have a marked effect on the crisis probabilities implying long run benefits to offset some of the costs that such regulations may impose

mixing housing tenures is it good for social well being mixing tenures is now a widely accepted policy designed to tackle problems of social exclusion in disadvantaged neighbourhoods however the evidence base for mixing tenures is fragmented and ambiguous with few exceptions studies of mixed tenure effects have been small one off investigations of individual communities providing only a rudimentary basis for comparative evaluation in attempting to address these issues a national level ecological analysis of mixed tenure in great britain was conducted using aggregate data from two decennial censuses and geocoded vital registrations asking the question whether mixing housing tenures is good for social well being the objective of the research is to establish under what if any circumstances tenure mixing is positively related to indicators of the social well being of an area s population the findings provide little support for positive outcomes and lead the authors to question the efficacy of mixing tenures as a policy for improving social well being

anomalies in intertemporal choice evidence and an interpretation research on decision making under uncertainly has been strongly influenced by the documentation of numerous expected utility eu anomalies behaviors that violate the expected utility axioms the relative lack of progress on the closely related topic of intertemporal choice is partly due to the absence of an analogous set of discounted utility du anomalies we enumerate a set of du anomalies analogous to the eu anomalies and propose a model that accounts for the anomalies as well as other intertemporal choice phenomena incompatible with du we discuss implications for savings behavior estimation of discount rates and choice framing effects

spatial impacts local labour market characteristics and housing prices this paper takes as a starting point a model where spatial variation in housing prices is explained by urban attraction and labour market accessibility effects using data from a region in south west norway estimation results are found to be encumbered however with significant spatial effects the spatial durbin model is used to account for this and to provide estimates of direct and indirect impacts in addition hypotheses are tested that some of the spatial variation in housing prices reflects local labour market characteristics some support is found for a hypothesis that a model specification should account for sub centres located at some distance from the central parts of the region the indirect impacts estimated in the spatial durbin model suggest that spatially related misspecifications of implicit elasticities in the ordinary least squares model are mainly due to negative externalities close to areas of high labour market accessibility

nonparametric nonlinear cotrending analysis with an application to interest and inflation in the united states given the assumption that the components of a vector time series are stationary around nonlinear deterministic time trends nonlinear cotrending is the phenomenon that one or more linear combinations of the time series are stationary around a linear trend or a constant hence the series have common nonlinear deterministic time trends in this article i develop nonparametric tests for nonlinear cotrending and i derive nonparametric estimators of the cotrending vectors i apply this approach to the federal funds rate and the consumer price index inflation rate in the united states using monthly data to analyze the price puzzle

the margin of safety and turning points in house prices observations from three developed markets using quarterly data from 1960 united kingdom 1963 united states and 1977 japan through the second quarter q2 of 2010 all three markets the authors examined long run mean reverting relationships between house prices and inflation disposable income gdp and rents at the end of q2 2010 u s prices were below their mean reverting levels and at the lower end of their historical range equivalent u k and japanese prices were at or slightly above their mean reverting levels

residential mobility and job changes under uncertainty abstract this paper empirically investigates households residential mobility and job change decisions under uncertainty we allow households degree of risk aversion to be a confounding factor in the joint decision of residential mobility and job changes using panel data to estimate a random effects multinomial probit model of households joint decision of residential and job mobility our empirical results show that risk aversion discourages a household from making any changes moreover when compared to single changes in either job or residential locations risk aversion is more discouraging for joint changes to more central residential locations and less discouraging for joint changes to more distant residential locations these effects are statistically significant albeit small in magnitude our empirical results demonstrate the uncertainty does play a role in households job and residential mobility decisions

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

bank integration and co movements across housing markets this paper investigates whether bank integration measured by cross border bank flows can capture the co movements across housing markets in developed countries by using a spatial dynamic panel model the transmission can occur through a global banking channel in which global banks intermediate wholesale funding to local banks changes in financial conditions are passed across borders through the banks balance sheet exposure to credit currency maturity and funding risks resulting in house price spillovers while controlling for country level and global factors we find significant co movement across housing markets of countries with proportionally high bank integration bank integration can better capture house price co movements than other measures of economic integration once we account for bank exposure other spatial linkages traditionally used to account for return co movements across region such as trade foreign direct investment portfolio investment geographic proximity etc become insignificant moreover we find that the co movement across housing markets decreases for countries with less developed mortgage markets characterized by fixed mortgage rate contracts low limits of loan to value ratios and no mortgage equity withdrawal

estimating the consumption and investment demands for housing and their effect on housing tenure status theoretical work suggests that families live in owner occupied housing if their investment demand for housing exceeds their consumption demand for housing using household data from the 1983 survey of consumer finances the authors test this theory by estimating an ordered probit model of whether families rent without owning property rent while owning property other than their home own their home without owning other properties or own their home in addition to other properties for owner occupiers who own additional property both the investment and consumption demands are directly observed enabling the authors to separately identify these functions copyright 1994 by mit press

rational bias in macroeconomic forecasts do professional forecasters provide their true unbiased estimates or do they behave strategically in our model forecasters have common information confer actively and thus know the true pdf of future outcomes intensive users of economic forecasts monitor forecasters performance closely occasional users are drawn to the forecaster who fared best in the previous period in the resulting nash equilibrium even though economists have identical expectations they make a range of projections that mimics the true probability distribution of the forecast variable those whose wages depend most on publicity produce forecasts that differ most from the consensus empirical evidence supports the model

interaction between housing prices and household borrowing the finnish case abstract employing time series econometrics this study shows that there has been a significant two way interaction between housing prices and housing loan stock in finland since the financial liberalization in the late 1980s before the financial deregulation the interaction was substantially weaker furthermore housing appreciation has a notable positive impact on the outstanding consumption loan stock it appears that there is no similar relationship between stock prices and credit understanding the two way interaction between housing prices and credit is of importance since the interdependence is likely to augment boom bust cycles in the economy and increase the fragility of the financial sector

substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands coombes m g green a e and owen d w 1988 substantive issues in the definition of localities evidence from sub group local labour market areas in the west midlands reg studies 22 303 318 local labour market areas llmas are now widely accepted as the most appropriate areal units for analyses of spatial patterns of employment and unemployment the most commonly used set of llmas in britain are the travel to work areas ttwas of the department of employment these areas are increasingly being used for locality studies that encompass not only labour and demand trends but also their social and political implications however ttwas are defined on the basis of aggregate commuting patterns which generalize substantial differences in the journey to work behaviour of different sections of the workforce this paper compares the ttwas as revised in 1984 with llmas defined using the same methodology for four sub groups of the labour force with differing skill levels in the west midlands the numb

testing for rational bubbles in the presence of structural breaks evidence from nonstationary panels this paper presents new results on the rational bubbles hypothesis for a panel of 18 oecd countries using the model developed by campbell 2000 we provide an analysis of international data that exploits increased power deriving from the panel unit root and cointegration methodology together with the flexibility of allowing explicitly for multiple endogenous structural breaks in the individual series differently from the time series methodology the panel data approach allows for a global analysis of the financial crashes that are related to rational bubbles we find strong evidence in favor of bubbles phenomena

inflation risk taxes and the demand for owner occupied housing a bstract a portfolio choice model is formulated which focuses on the possibility of inflation hedging motives in housing demand in the 1970s an asset demand equation is used to estimate the capitalization of inflation expectations into house prices through tax mortgage and hedging effects the empirical results indicate that even after accounting for tax and mortgage effects the hedging motive was significant in bidding up house prices one implication is that the tax effects of inflation may have been overstated in previous research that ignored inflation risk

a framework for housing market area delineation principles and application a review is presented of the requirements of a framework for the delineation of housing market areas hmas in the context of undertaking a housing market assessment this prompts adoption of a methodology that features an iterative application of information obtained from estate agents to identify hma cores and a functional regionalisation of 2001 census interward migration flows the approach is demonstrated using data for north west england the concluding section explores some implications of the hma framework for policy and future research

bureaucrats legislators and the size of government some recent theories have blamed the growth of government on budget maximizing bureaucrats who are assumedly capable of imposing their most preferred budget output combination on legislatures subject to cost and demand constraints however theoretical examination of the range of bargaining outcomes that might occur between bureau and legislature shows that budget maximizing behavior does not necessarily lead to super optimal levels of production nor do the suggested reforms of competition and privatization necessarily improve the situation in this bargaining model the central determinants of governmental growth are not budget maximizing bureaucrats but the legislature s decisions regarding mode of oversight and form of internal organization

why are professional forecasters biased agency versus behavioral explanations professional forecasters may not simply aim to minimize expected squared forecast errors in models with repeated forecasts the pattern of forecasts reveals valuable information about the forecasters even before the outcome is realized rational forecasters will compromise between minimizing errors and mimicking prediction patterns typical of able forecasters simple models based on this argument imply that forecasts are biased in the direction of forecasts typical of able forecasters our models of strategic bias are rejected empirically as forecasts are biased in directions typical of forecasters with large mean squared forecast errors this observation is consistent with behavioral explanations of forecast bias

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

when will housing recover an interesting perspective on recent trends in the u s housing market is gained by noting how housing prices correspond to per capita income a traditional measure of affordability the ratio of housing prices to per capita income is high but close to historical norms in many regional markets however notable exceptions do exist in california housing prices recently reached levels relative to per capita income far above historical norms a significant pricing correction has begun in that market similarly housing prices are correcting sharply in arizona florida and nevada investors need to be mindful of the potential for housing market related losses and the potential for contagion among asset classes see comments and response on this article

district house price movements in england and wales 1997 2007 an exploratory spatial data analysis approach using exploratory spatial data analysis and house price data from local authority districts in england and wales this article considers whether a regional ripple effect can be tracked at the district level although spatial house price variation has been explored at a sub regional level this is possibly the first paper to attempt to track house price spillover between districts on a national basis high and low growth clusters of areas are traced it is concluded that spatial spillover of house price growth is unlikely to be based on interlocked markets bonded by commuting or migration alone information flows and expectations are likely to reinforce interdistrict transmission specifically house price spillover north of the east midlands appears much more rapid than would be consistent with a ripple suggesting that there is some support for undertaking british housing market analysis on a spatially segmented basis even at a regional level

explaining bureaucratic optimism theory and evidence from u s executive agency macroeconomic forecasts we offer a theory of intertemporal bureaucratic decision making which proposes that an agency s forecast optimism is related to the extent to which it discounts future reputation costs associated with bureaucratic incompetence agency forecasts of the distant future are more likely to be optimistic than short term forecasts we claim that unstable organizations will discount reputation costs at a steeper rate than stable organizations and therefore will produce more optimistic forecasts we test our theory using macroeconomic forecasts produced by the office of management and budget omb and the social security administration ssa across six forecast horizons from 1979 to 2003 the statistical results are generally consistent with our theory omb generates more optimistic long term forecasts than ssa further differences in forecast optimism between these executive branch agencies widen as the forecast horizon increases our evidence suggests that more stable agencies place a premium on minimizing reputation costs conversely less stable agencies are more likely to accommodate political pressures for forecast optimism these findings underscore the importance of institutional design for understanding how executive agencies balance the conflicting goals of political responsiveness and bureaucratic competence within the administrative state

how much is a tulip worth the kind of passion to possess tulip bulbs that gripped holland some 350 years ago may be alive and well today among certain u s equity investors

housing cycles and macroeconomic fluctuations a global perspective abstract this paper investigates the international spillovers of housing demand shocks on real economic activity the global economy is modeled using a global var with a novel house price data set for both advanced and emerging economies the impulse responses to an identified u s housing demand shock confirm the existence of strong international spillovers to advanced economies in contrast the response of some major emerging economies is not significantly different from zero moreover the analysis of synchronized housing demand shocks speaks in favor of the recent evidence of increased resilience of emerging economies to shocks originating in advanced economies and it also suggests that a close monitoring of housing cycles in advanced economies as well as in emerging economies should be of interest for policy makers

the extent of the market examines the classical theory of the market in this paper authors consider the role of price market determination price movement in competitive and monopolistic markets extension of commodity markets

asymmetric effects of the business cycle on bank credit risk abstract prior empirical research on the relation between credit risk and the business cycle has failed to properly investigate the presence of asymmetric effects to fill this gap we examine this relation both at the aggregate and the bank level exploiting a unique dataset on italian banks borrowers default rates we employ threshold regression models that allow to endogenously establish different regimes identified by the thresholds over below which credit risk is more less cyclical we find that not only are the effects of the business cycle on credit risk more pronounced during downturns but cyclicality is also higher for those banks with riskier portfolios

regional spillover and rising connectedness in china s urban housing prices regional housing prices may be dynamically linked and converge to a long run equilibrium the level of connectedness can be used to describe systemic risk in the housing market this paper uses a r

credit channel trade credit channel and inventory investment evidence from a panel of uk firms abstract in this paper we use a panel of 609 uk firms over the period 1980 2000 to test for the existence of a trade credit channel of transmission of monetary policy and for whether this channel plays an offsetting effect on the traditional credit channel we estimate error correction inventory investment equations augmented with the coverage ratio and the trade credit to assets ratio differentiating the effects of the latter variables across firms more or less likely to face financing constraints and firms making a high or low use of trade credit our results suggest that both the credit and the trade credit channels operate in the uk and that the latter channel tends to weaken the former

estimating the linear quadratic inventory model maximum likelihood versus generalized method of moments abstract we compare generalized method of moments gmm and maximum likelihood ml estimators of the parameters of a linear quadratic inventory model using nondurable manufacturing data and monte carlo simulations data based gmm estimates for five normalizations vary widely generally rejecting the model the ml estimate generally supports the model monte carlo experiments reveal that the gmm estimates are often biased apparently due to poor instruments statistically insignificant economically implausible and dynamically unstable the ml estimates are generally unbiased even in misspecified models statistically significant economically plausible and dynamically stable asymptotic standard errors for ml are 3 to 15 times smaller than for gmm

competition and credit procyclicality in european banking abstract this paper empirically assesses how competition in the banking sector affects credit procyclicality by estimating both an interacted panel var model using macroeconomic data and a single equation model with bank level data these two empirical approaches show that a deviation of actual gdp from potential gdp leads to greater credit fluctuations in economies where bank competition is weak this suggests that increased market power for banks increases the financial accelerator mechanism which is consistent with recent macroeconomic models showing that monopolistic banking tends to increase macroeconomic volatility by making credit cheaper during booms and more expensive during recessions

monetary policy in a data rich environment abstract most empirical analyses of monetary policy have been confined to frameworks in which the federal reserve is implicitly assumed to exploit only a limited amount of information despite the fact that the fed actively monitors literally thousands of economic time series this article explores the feasibility of incorporating richer information sets into the analysis both positive and normative of fed policymaking we employ a factor model approach developed by stock j h watson m w diffusion indices journal of business economic statistics 2002 20 2 147 forecasting inflation 1999 journal of monetary economics 44 2 293 that permits the systematic information in large data sets to be summarized by relatively few estimated factors with this framework we reconfirm stock and watson s result that the use of large data sets can improve forecast accuracy and we show that this result does not seem to depend on the use of finally revised as opposed to real time data we estimate policy reaction functions for the fed that take into account its data rich environment and provide a test of the hypothesis that fed actions are explained solely by its forecasts of inflation and real activity finally we explore the possibility of developing an expert system that could aggregate diverse information and provide benchmark policy settings

the definition of housing market areas and strategic planning the purpose of this paper is to develop the concept of a housing market area thereby provide insights into our understanding of the sub regional structures of the housing system and hence propose a framework for strategic planning research in the housing market to tackle this task it is first necessary to consider the criteria for a local housing market area the paper begins by reviewing previous definitions by both academics and planners and their underlying assumptions based on the principle of spatial arbitrage a local housing market area is defined by reference to criteria linked to migration self containment parallels are drawn with the principles that have been applied to define a system of spatial labour markets using travel to work areas this spatial arbitrage definition is tested empirically by developing a system of housing market areas for west central scotland using data derived from the land registry finally the paper draws together the empirical findings to discuss the nature of s

cluster sample methods in applied econometrics inference methods that recognize the clustering of individual observations have been available for more than 25 years brent moulton 1990 caught the attention of economists when he demonstrated the serious biases that can result in estimating the effects of aggregate explanatory variables on individual specific response variables the source of the downward bias in the usual ordinary least squares ols standard errors is the presence of an unobserved state level effect in the error term more recently john pepper 2002 showed how accounting for multi level clustering can have dramatic effects on t statistics while adjusting for clustering is much more common than it was 10 years ago inference methods robust to cluster correlation are not used routinely across all relevant settings in this paper i provide an overview of applications of cluster sample methods both to cluster samples and to panel data sets

alternative mortgage instruments the tilt problem and consumer welfare mortgage instrument in the united states for the last 50 years and for much of this period it has performed well however during periods of high and volatile rates of inflation the sfpm suffers from severe weaknesses 1 foremost among these problems from the standpoint of the borrower is the tilt in the stream of real mortgage payments toward the initial years of the mortgage for consumers unconstrained by capital market imperfections this tilt is unimportant however a consumer is typically unable to borrow against expected higher future income or against the nominal capital gains that accrue to the owner of a house over the life of the mortgage in addition common practices of mortgage lenders often limit mortgage payments to some fraction of income at the time of purchase together these liquidity constraints create a mismatch between the time se quence of mortgage payments and income a mismatch that reduces the number of borrowers who qualify for financing and that limits the value of the house purchased by those who do obtain financing 2 in an attempt to reduce the problems created by this mismatch a variety of alternative mortgage instruments amis has been suggested three of the most important are the graduated payment mortgage gpm the shared appreciation mortgage sam and the price level adjusted mortgage plam 3 with the gpm mortgage payments rise at some specified rate during a portion of the mortgage life the sam enables the lender to share in the appreciation of the university of colorado boulder and syracuse university respectively this paper was writ ten while the first author was at syracuse university funding for the research was shared by the office of the comptroller of the currency the federal horne loan bank board and the department of housing and urban development mary anne beeman served as research assistant and the manu

sophisticated reaction in the u s soviet arms race evidence of rational expectations because of the pervasive security rivalry between the united states and the soviet union information about the expected future behavior of the rival state proves useful to domestic political actors competing to influence budgetary allocations this article examines the hypothesis that in the aggregate this process of sophisticated reaction approximates the behavior of two unitary rational actors capable of forming rational expectations of each other s behavior this rational expectations arms race model implies that the military expenditure series of arms racers should be independent in the granger causal sense but that their residuals should be correlated contemporaneously the latter prediction is inconsistent with bureaucratic process models or alternative expectational formulations and empirical analysis of u s and soviet yearly military expenditures is provided that supports the predictions of the rear model finally some implications of this intimate linkage between the domestic policy processes of these two rival superpowers are briefly discussed

credit booms monetary integration and the new neoclassical synthesis abstract credit to the private sector has risen rapidly in many new central and eastern european eu member states nms in recent years the lending boom has recently been particularly strong in the segment of loans to households primarily mortgage based housing loans and in those countries that operate currency boards or other forms of hard pegs the main aim of this paper is to propose a conceptual framework to analyze the observed developments with a view to exploring some policy implications at a stage in which these countries are preparing for their prospective integration with the euro area to achieve this we first use a stylized new neoclassical synthesis nns framework which has recently been advanced by goodfriend goodfriend m 2002 monetary policy in the new neoclassical synthesis a primer federal reserve bank of richmond july and goodfriend and king goodfriend m king r 2001 the case for price stability nber working paper 8423 we then discuss the implications of the nns model for credit dynamics and ensuing monetary policy challenges specifically we emphasize consumption smoothing as an important channel of the observed credit expansion and we show how it is related to and how it affects the monetary policy making in ms in doing so we place our discussion in the context of the monetary integration process in general and the nominal convergence process in particular

house prices non fundamental components and interstate spillovers the australian experience abstract using australian capital city data from 1984q3 2008q2 this paper utilizes a dynamic present value model within a var framework to construct time series of house prices depicting what aggregate house prices should be given expectations of future real disposable income the fundamental price and continues by comparing capital city fundamental prices with actual prices the extent to which revealed capital city non fundamental components spillover from state to state as well as their long term impact is also investigated results provide evidence of periods of sustained deviations of house prices from values warranted by income for all state capitals with the greatest deviations arising in the nsw market and starting around 2000 in general nsw is relatively more susceptible to spillovers transmitted from other states while act and wa are most isolated from the rest of the country

non temporal components of residential real estate appreciation this paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions it proposes a control for the problem of fixed components in the capital appreciation return used in transactions based return estimates we find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods the sign and magnitude of the bias as well as its systematic variation across property suggest that it is caused by incremental home improvements as well as by price risk we propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples copyright 1995 by mit press

the great recession us dynamics and spillovers to the world economy abstract this paper provides an empirical investigation of both the within us and international channels of transmission of macroeconomic and financial shocks by means of a 50 country macroeconometric model estimated over the 1980 2009 period including measures of excess liquidity and financial fragility specifically designed in order to evaluate the relevance of the boom bust credit cycle view put forward as an interpretation of the recent great recession episode we find that such a view is consistent with the empirical evidence moreover concerning the real effects of financial shocks within the us we detect stronger evidence of an asset prices channel rather than a liquidity channel concerning the spillovers to the world economy we find that while financial disturbances are transmitted to foreign countries through us house and stock price dynamics as well as excess liquidity creation the trade channel is the key trasmission mechanism of real shocks

international house prices and macroeconomic fluctuations abstract the paper investigates linkages between general macroeconomic conditions and the housing market for the g 7 area among the key results of the paper we find that the us are an important source of global fluctuations not only for real activity nominal variables and stock prices but also for real housing prices secondly albeit distinct driving forces for real activity and financial factors can be pointed out sizeable global interactions are also evident in particular global supply side shocks are an important determinant of g 7 house prices fluctuations the linkage between real housing prices and macroeconomic developments is however bidirectional with investment showing in general a stronger reaction than consumption and output to housing price shocks implications for the real effects of the sub prime crisis are also explored

the effects of price risk on housing demand empirical evidence from u s markets this article examines how price risk affects housing demand it identifies two relevant channels a financial risk effect that reduces demand and a hedging effect that increases demand since current homes may hedge future housing costs the latter dominates when hedging incentives are strong namely when the likelihood of moving up the housing ladder is high and the tendency to move across markets is low for households with weak hedging incentives the article finds negative effects of price risk on the timing and size of home purchases but positive effects for households with strong hedging incentives

the spatial interaction of housing and labour markets commuting flow analysis of north west england the consideration of housing and labour market interaction is a relatively recent development in an academic and policy debate which has traditionally considered home and work in isolation this pa

tiered housing markets and their relationship to labour market areas this paper develops a tiered geography of local housing market areas hmas that provides a national framework for spatial planning it is derived from a theoretical understanding of the economic basis of hmas the analysis explores the relationships between the tiers of the hma geography and local labour market areas drawing on this understanding the empirical research generates sets of different potential geographies of hmas for england based on an algorithm that applies criteria linked to the degree of closure of migration and or commuting patterns a range of theoretically appropriate criteria then enable the different geographies to be assessed the choice of geography is guided by chow tests of statistical differences in standardised house prices in neighbouring hmas derived from hedonic regressions finally conclusions are drawn on the validity of the approach developed the empirical work is on england and datasets drawn from the census and land registry

cross country effects of regulatory capital arbitrage abstract one reason for the recent asset price bubbles in many developed countries could be regulatory capital arbitrage regulatory and legal changes can help traditional banks to move their assets off their balance sheets into the lightly regulated shadows and thus enable regulatory arbitrage through the securitized sector this paper adopts a global vector autoregression gvar methodology to assess the effects of regulatory capital arbitrage on equity prices house prices and economic activity across 11 oecd countries regions a counterfactual experiment disentangles the effects of regulatory arbitrage following a change in the net capital rule for investment banks in april 2004 and the adoption of the basel ii accord in june 2004 the results provide evidence for the existence of an international finance multiplier with about half of the countries overshooting u s impulse responses the counterfactual shows that regulatory arbitrage via the u s securitized sector may enhance the cross country reallocation of capital from housing markets towards equity markets