capital inflows financial structure and housing booms we use a panel var to study the effect of shocks to capital inflows which are identified using sign restrictions on the housing market in oecd countries to explore how effects of these shocks change with the structure of the mortgage market and the degree of mortgage securitization we allow the var coefficients to vary with mortgage market characteristics our results indicate that capital inflow shocks have a significant and positive effect on real house prices real credit available to the private sector and real residential investment the responses of these variables are stronger in countries with more developed mortgage markets and in countries where securitization is allowed

inequality and polarisation in health systems responsiveness a cross country analysis the world health report 2000 proposed three fundamental goals for health systems encompassing population health health care finance and health systems responsiveness the goals incorporate both an efficiency and equity dimension while inequalities in population health and health care finance have motivated two important strands of research inequalities in responsiveness have received less attention in health economics this paper examines inequality and polarisation in responsiveness bridging this gap in the literature and contributing towards an integrated analysis of health systems performance it uses data from the world health survey to measure and compare inequalities in responsiveness across 25 european countries in order to respect the inherently ordinal nature of the responsiveness data median based measures of inequality and polarisation are employed the results suggest that in the face of wide differences in the health systems analysed there exists large variability in inequality in responsiveness across countries

the spatial and temporal diffusion of house prices in the uk abstract this paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system we use changes in real house prices within the uk economy at the level of regions to illustrate its use adjustment to shocks involves both a region specific and a spatial effect shocks to a dominant region london are propagated contemporaneously and spatially to other regions they in turn impact on other regions with a delay we allow for lagged effects to echo back to the dominant region london in turn is influenced by international developments through its link to new york and other financial centers it is shown that new york house prices have a direct effect on london house prices we analyse the effect of shocks using generalised spatio temporal impulse responses these highlight the diffusion of shocks both over time as with the conventional impulse responses and over space

inflation and welfare in a monetary economy it is in everyone s private interest to try to get someone else to hold non interest bearing cash and reserves but someone has to hold it all so these efforts must simply cancel out all of us spend several hours per year in this effort and employ thousands of talented and highly trained people to help us these person hours are simply thrown away wasted on a task that should not have to be performed at all

equity in the finance of health care some international comparisons this paper presents the results of a ten country comparative study of health care financing systems and their progressivity characteristics it distinguishes between the tax financed systems of denmark portugal and the u k the social insurance systems of france the netherlands and spain and the predominantly private systems of switzerland and the u s it concludes that tax financed systems tend to be proportional or mildly progressive that social insurance systems are regressive and that private systems are even more regressive out of pocket payments are in most countries an especially regressive means of raising health care revenues

housing finance and monetary policy we document three facts concerning how the structure of housing finance affects the monetary transmission mechanism first the characteristics of residential mortgage markets differ markedly across industrialized countries second the impact of monetary policy shocks to residential investment and house prices is significantly stronger in those countries with larger flexibility development of mortgage markets third the transmission to consumption is stronger only in those countries where mortgage equity release is common and mortgage contracts are predominantly of the variable rate type we then build a two sector dsge model with financial constraints to rationalize those facts

the effects of monetary policy at different stages of economic development abstract the effects of monetary policy vary significantly across countries in particular recent empirical work finds evidence of a tobin effect in high income countries and a reverse tobin effect in less developed economies we present a neoclassical growth model where money is required for investment and consumption purposes in contrast to standard cash in advance models the reliance on cash is inversely related to the extent of capital formation in this setting we demonstrate that the effects of monetary policy depend on the level of development in particular inflation adversely affects capital formation at low levels of income because there is a high reliance on cash and a high cost of capital by comparison the financial system operates more efficiently in advanced countries consequently monetary policy generates a tobin effect

booms and busts in the uk housing market the often volatile behaviour of uk house prices between 1957 and 1994 is analysed in an annual econometric model theory suggests that financial liberalisation of mortgage markets in the 1980s should have led to notable shifts in house price behaviour the evidence supports the predictions of theory suggesting shifts took place in wealth effects as in the consumption function and that real interest rates and income expectations became more important the presence of transactions costs suggests important nonlinearities in house price dynamics the paper also contains an explicit econometric treatment of expectations demography supply spillovers from the rented sector and of composition biases in the official house price index

understanding global liquidity abstract we explore the concept of global liquidity based on a factor model estimated using a large set of financial and macroeconomic variables from 24 advanced and emerging market economies we measure global liquidity conditions based on the common global factors in the dynamics of liquidity indicators by imposing theoretically motivated sign restrictions on factor loadings we achieve a structural identification of the factors the results suggest that global liquidity conditions are largely driven by three common factors and can therefore not be summarised by a single indicator these three factors can be identified as global monetary policy global credit supply and global credit demand

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

prescription drug expenditures in the united states the effects of obesity demographics and new pharmaceutical products author affiliation donald vandegrift professor of economics the college of new jersey 2000 pennington rd ewing nj 08628 usa vandedon tcnj eduanusua datta associate professor of economics school of business administration philadelphia university school house lane and henry avenue philadelphia pa 19144 usa dattaa philau edu corresponding author acknowledgment we wish to thank subarna samanta judith shinogle and karen conway for helpful discussions and comments julie l hotchkiss provided us with valuable suggestions for an earlier version of this article and we benefited from advice given by two anonymous referees at this journal ellie fogarty ravi kaneriya michael ferlise and leigh ann culbertson provided valuable research assistance 1 introductionduring the period 1990 1998 real per capita expenditures on prescription drugs in the u s increased by 84 1996 dollars gdp deflator beginning in 1993 the average annual percentage increase in prescription drug spending exceeded the overall percentage increase in national health expenditures by 1998 the annual percentage growth in prescription drug spending was more than 16 while overall spending on health care rose less than 6 compared to the previous year in total u s consumers spent more than 90 billion on prescription drugs in 1998 or 334 on a per capita basis centers for medicare and medicaid services 2002 not surprisingly prescription drug coverage and its associated costs have become issues in national as well as state political campaigns 1but the rising expenditures were not simply caused by higher prescription drug prices while the cpi consumer price index for prescription drugs rose by 42 nominal per capita expenditures on prescription drugs rose 120 during the period u s bureau of the census 2002 consequently higher rates of prescription drug consumption explain at least part of the story further while overall prescription drug spending has increased rapidly per capita prescription drug use in the united states varies widely by state in 1998 some states had per capita prescription drug spending of more than 400 while other states residents spent half that much while we do not wish to absolve the pharmaceutical manufacturers this data suggests that arguments placing the blame for high prescription drug costs on the prices and profits of pharmaceutical manufacturers may be missing a portion of the story the literature on prescription drugs suggests a number of causes e g new drug introductions aging of the population insurance coverage however berndt 2002 notes that a shortcoming of the existing literature is the lack of quantitative estimates of the causes for increased consumption of prescription drugs since the mid 1990s in a similar vein kane 1997 concludes that the effect of the managed care revolution has been difficult to separate out from the other forces affecting pharmaceuticals to better inform public policy we provide some quantitative estimates of the factors that have contributed to the increase in prescription drug expenditures we investigate the role of public health factors obesity smoking and alcohol consumption rates aging population 65 and over access to medical care managed care enrollments and the relative size of the uninsured population new pharmaceutical products income and unemployment on real prescription drug expenditures using panel data from all 50 u s states for the period 1990 1998 the estimates should allow better projections of the anticipated increase in prescription drug expenditures gauging the costs of smoking obesity and alcohol consumption is also important high costs associated with any of these public health problems make it easier to justify costly government programs to reduce their prevalence thus public policy responses to rising prescription drug expenditures will vary based on the source of the increase

inflation output and welfare this paper studies the effects of anticipated inflation on aggregate output and welfare within a search theoretic framework we allow money holders to choose the intensities with which they search for trading partners so inflation affects the frequency of trade as well as the quantity of output produced in each trade we consider the standard pricing mechanism for search models i e ex post bargaining as well as a notion of competitive pricing if prices are bargained over the equilibrium is generically inefficient and an increase in inflation reduces buyers search intensities output and welfare if prices are posted and buyers can direct their search search intensities are increasing with inflation for low inflation rates and decreasing for high inflation rates the friedman rule achieves the first best allocation and inflation always reduces welfare even though it can have a positive effect on output for low inflation rates

who pays for health care in asia we estimate the distributional incidence of health care financing in 13 asian territories that account for 55 of the asian population in all territories higher income households contribute more to the financing of health care the better off contribute more as a proportion of ability to pay in most low and lower middle income territories health care financing is slightly regressive in three high income economies with universal social insurance direct taxation is the most progressive source of finance and is most so in poorer economies in universal systems social insurance is proportional to regressive in high income economies the out of pocket oop payments are proportional or regressive while in low income economies the better off spend relatively more oop but in most low middle income countries the better off not only pay more they also get more health care

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

progressivity horizontal equity and reranking in health care finance a decomposition analysis for the netherlands this paper employs the method of aronson et al 1994 to decompose the redistributive effect of the dutch health care financing system into three components a progressivity component a classical horizontal equity component and a reranking component results are presented for the health care financing system as a whole as well as for its constituent parts a final section sets out to uncover the relative importance in terms of their effects on progressivity horizontal equity and reranking of the key institutional features of one component of the dutch system the awbz social insurance scheme

effects of price and deductibles on medical care demand estimated from survey data this paper estimates the price sensitivity of medical care demand from cross sectional survey data by relating medical consumption to approximated copayment rates resulting from deductibles instead of the deductibles itself a transformation is used that better takes into account that expected expenditures at policy level play an important role in the reaction of consumers with regard to their deductible this transformation approximates the average expected copayment rate that is the portion of expenditures that one may expect at the beginning of the year to pay out of pocket given the deductible and given the expected expenditures at policy level the principal finding is an estimated price elasticity of medical care demand of 0 079 the highest price sensitivity was found for physiotherapy visits 0 12 and general practitioner visits 0 085 and the lowest for specialist visits 0 074 and prescription drugs 0 056 hospital care demand appeared not to be affected by deductibles

house prices and credit constraints making sense of the us experience most us house price models break down in the mid 2000s due to the omission of exogenous changes in mortgage credit supply associated with the sub prime mortgage boom from house price to rent ratio and inverted housing demand models previous models lack data on credit constraints facing first time home buyers incorporating a measure of credit conditions the cyclically adjusted loan to value ratio for first time buyers into house price to rent ratio models yields stable long run relationships more precisely estimated effects reasonable speeds of adjustment and improved model fits

bank business models regulation and the role of financial market participants in the global financial crisis the recent financial crisis shone a spotlight on several key issues bank regulation bank models and the relationship between traditional banking the interbank markets and the markets for complex financial derivatives indeed the role that derivatives such as credit default swaps and collateralised debt obligations played in the credit bubble and the subsequent credit crunch may appear to have made this financial crisis unique however the fundamental cause of this crisis which led directly to the worst global recession since the 1930s is all too familiar ultimately too much money was lent to too many people who could not afford to pay it back it was a classic bank crisis of over lending but this time on a global scale

inflation and welfare a search approach this paper extends recent findings in the search theoretic literature on monetary exchange regarding the welfare costs of inflation we present first estimates of the welfare cost of inflation using the welfare triangle methodology of bailey 1958 and lucas 2000 we then derive a money demand function from the search theoretic model of lagos and wright 2005 and we estimate it from u s data over the period 1900 2000 we show that the welfare cost of inflation predicted by the model accords with the welfare triangle measure when pricing mechanisms are such that buyers appropriate the social marginal benefit of their real balances for other mechanisms welfare triangles underestimate the true welfare cost of inflation because of a rent sharing externality we also point out other inefficiencies associated with noncompetitive pricing which matter for estimating the cost of inflation we then illustrate how endogenous participation decisions can mitigate or exacerbate the cost of inflaion and we provide calibrated examples in which a deviation from the friedman rule is optimal finally we discuss distributional effects of inflation

money in search equilibrium in competitive equilibrium and in competitive search equilibrium we compare three market structures for monetary economies bargaining search equilibrium price taking competitive equilibrium and price posting competitive search equilibrium we also extend work on the microfoundations of money by allowing a general matching technology and entry we study how equilibrium and the effects of policy depend on market structure under bargaining trade and entry are both inefficient and inflation implies first order welfare losses under price taking the friedman rule solves the first inefficiency but not the second and inflation may actually improve welfare under posting the friedman rule yields the first best and inflation implies second order welfare losses

a comparison of two new measures of tax progressivity recently n c kakwani i977 and daniel suits i977 independently and simultaneously developed new measures of the degree of tax progression both measures are related to the gini ratio of income inequality and are distinct from conventional elasticity measures of progressivity in that each yields a summary statistic while standard elasticity measures of progressivity vary as the tax base changes in this paper we briefly describe the measures identify their important characteristics and establish the analytical relation between them empirical calculations of the progressivity of the u s income tax system for the period i 962 76 reveal that the two measures display different magnitudes of change in progressivity more importantly in three out of fourteen years the measures moved in opposite directions

the drivers of financial globalization over the past decade emerging markets have accounted for a growing fraction of world gdp and international trade reflecting fast growth in china and india but also strong economic performance across the board and the spec tacular increase in foreign exchange reserve holdings the growing importance of sovereign wealth funds and the pattern of global imbal ances more generally suggest that these coun tries are also playing a major role in financial globalization

the changing role of government in financing health care an international perspective this paper explores the changing role of government involvement in health care financing policy outside the united states it provides a review of the economics literature in this area to elucidate the implications of recent policy changes on efficiency costs and quality our review reveals that there has been some convergence in policies adopted across countries to improve financing incentives and encourage efficient use of health services in the case of risk pooling all countries with competing pools experience similar difficulties with selection and are adopting more sophisticated forms of risk adjustment in the case of hospital competition the key drivers of success appear to be what is competed on and measurable rather than whether the system is public or private in the case of both the success of performance related pay for providers and issues resulting from wait times evidence differs within and across jurisdictions however the evidence does suggest that some governments have effectively reduced wait times when they have chosen explicitly to focus on achieving this goal many countries are exploring new ways of generating revenues for health care to enable them to cope with significant cost growth but there is little evidence to suggest that collection mechanisms alone are effective in managing the cost or quality of care jel h51 i11 i18

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

liquidity management of u s global banks internal capital markets in the great recession abstract the recent crisis highlighted the importance of globally active banks in linking markets one channel for this linkage is through how these banks manage liquidity across their entire banking organization we document that funds regularly flow between parent banks and their affiliates in diverse foreign markets we show that parent banks when hit by a funding shock reallocate liquidity in the organization according to a locational pecking order affiliate locations that are important for the parent bank revenue streams are relatively protected from liquidity reallocations in the organization while traditional funding locations are more extensively used to buffer shocks to the parent bank balance sheets

macroprudential and monetary policies implications for financial stability and welfare in this paper we analyze the implications of macroprudential and monetary policies for business cycles welfare and financial stability we consider a dynamic stochastic general equilibrium dsge model with housing and collateral constraints a macroprudential rule for the loan to value ratio ltv which responds to credit growth interacts with a traditional taylor rule for monetary policy we compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non coordinated way we find that both policies acting together unambiguously improves the stability of the system in both cases this interaction is welfare improving for the society especially in the case of the non coordinated game there is though a trade off between borrowers and savers however borrowers can compensate the saver s welfare loss view the mathml sourcela kaldor hicks to achieve a pareto superior outcome

equity in the finance and delivery of health care some tentative cross country comparisons textabstractequity is widely acknowledged to be an important goal in the field of health care indeed mclachlan and maynard 1982 have gone so far as to suggest that the vast majority of the population would elect for equity to be the prime consideration p 556 a view endorsed by mooney 1986 p 145 several researchers have investigated how successful their own country s delivery and or financing system is in achieving its stated equity goals in general the strategy of these studies is to compare the current situation with some ideal or target situation le grand 1978 for example in what has become a classic study in the field compares the distributions across socio economic groups of illness and public expenditure on health care in britain in 1972 and concludes that the national health service nhs has failed to achieve equity in the delivery of health care

financial integration housing and economic volatility abstract the great recession illustrates the sensitivity of the economy to housing this paper shows that financial integration fostered by securitization and nationwide branching amplified the positive effect of housing price shocks on the economy during the 1994 2006 period we exploit variation in credit supply subsidies across local markets from government sponsored enterprises to measure housing price changes unrelated to fundamentals using this instrument we find that house price shocks spur economic growth the effect is larger in localities more financially integrated through both secondary loan market and bank branch networks financial integration thus raised the effect of collateral shocks on local economies increasing economic volatility

financial flows financial crises and global imbalances abstract in this lecture i document the proliferation of gross international asset and liability positions and discuss some consequences for individual countries external adjustment processes and for global financial stability in light of the rapid growth of gross global financial flows and the serious risks associated with them one might wonder about the continuing relevance of the net financial flow measured by the current account balance i argue that global current account imbalances remain an essential target for policy scrutiny for financial as well as macroeconomic reasons nonetheless it is critically important for policymakers to monitor as well the rapidly evolving structure of global gross assets and liabilities

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

stock market synchronization and monetary integration abstract this paper focuses on the relationship between stock market comovements and monetary integration a panel specification is used to explain bilateral stock market return correlations between fifteen developed economies over the period 1975 2006 time fixed effects are included to capture global shocks and we also examine the role of bilateral trade linkages and international financial integration monetary integration leads to stronger stock market synchronization both through the elimination of exchange rate volatility and through the common monetary policy and the convergence of inflation expectations trade and financial integration also contribute to higher stock market return comovements

domestic credit growth and international capital flows during the pre crisis period europe experienced substantial cross country variation in domestic credit growth and cross border capital flows we investigate the inter relations between domestic credit growth and international capital flows during the period 1993 2008 with a special focus on the boom period of 2003 2008 we establish that domestic credit growth in european countries is strongly related to net debt inflows but not to net equity inflows this pattern also holds for an extended sample of 54 advanced and emerging economies

global market integration an alternative measure and its application global markets seem to be increasingly integrated but there is no well accepted measure of integration we show that the correlation across markets is a poor measure perfectly integrated markets can exhibit weak correlation we derive a new integration measure based on the explanatory power of a multi factor model and use it empirically to investigate recent trends in global integration for most countries there has been a marked increase in measured integration over the past three decades but this is not indicated by correlations among country indexes

an econometric analysis of health care expenditure a cross section study of the oecd countries this paper is an empirical examination of the determinants of aggregate health care expenditure the paper presents a systematic analysis of relationships across 19 oecd countries showing the effects of aggregate income institutional and socio demographic factors on health care expenditure the results indicate that institutional factors of the health systems in addition to per capita gross domestic product gdp contribute significantly to the explanation of the health care expenditure variation between countries for example the way physicians in outpatient care are paid and the mixture of public private funding and inpatient outpatient care

banking integration and house price co movement abstract the correlation in house price growth across us states increased steadily between 1976 and 2000 this paper shows that the contemporaneous geographic integration of the us banking market via the emergence of large banks was a primary driver of this phenomenon to this end we first theoretically derive an appropriate measure of banking integration across state pairs and show that house price growth correlation is strongly related to this measure of financial integration our instrumental variable estimates suggest that banking integration can explain up to one fourth of the rise in house price correlation over this period

equity in the finance of health care some further international comparisons this paper presents further international comparisons of progressivity of health care financing systems the paper builds on the work of wagstaff et al wagstaff a van doorslaer e et al 1992 equity in the finance of health care some international comparisons journal of health economics 11 pp 361 387 but extends it in a number of directions we modify the methodology used there and achieve a higher degree of cross country comparability in variable definitions we update and extend the cross section of countries and we present evidence on trends in financing mixes and progressivity

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

the dark side of global integration increasing tail dependence abstract we measure stock market coexceedances using the methodology of cappiello gerard and manganelli 2005 ecb working paper 501 this method enables us to measure comovement at each point of the return distribution first we construct annual coexceedance probabilities for both lower and upper tail return quantiles using daily data from 1974 2006 next we explain these probabilities in a panel gravity model framework results show that macroeconomic variables asymmetrically impact stock market comovement across the return distribution financial liberalization significantly increases left tail comovement whereas trade integration significantly increases comovement across all quantiles decreasing exchange rate volatility results in increasing lower tail comovement the introduction of the euro increases comovement across the entire return distribution thereby significantly reducing the benefits of portfolio diversification within the euro area

house prices capital inflows and macroprudential policy this paper evaluates the monetary and macroprudential policies that mitigate the procyclicality arising from the interlinkages between current account deficits and financial vulnerabilities we develop a two country dynamic stochastic general equilibrium dsge model with heterogeneous households and collateralised debt the model predicts that external shocks are important in driving current account deficits that are coupled with run ups in house prices and household debt in this context optimal policy features an interest rate response to credit and a ltv ratio that countercyclically responds to house price dynamics by allowing an interest rate response to changes in financial variables the monetary policy authority improves social welfare because of the large welfare gains accrued to the savers the additional use of a countercyclical ltv ratio that responds to house prices increases the ability of borrowers to smooth consumption over the cycle and is pareto improving domestic and foreign shocks account for a similar fraction of the welfare gains delivered by such a policy

europe and central asia s great post communist social health insurance experiment aggregate impacts on health sector outcomes abstract the post communist transition to social health insurance in many of the central and eastern european and central asian countries provides a unique opportunity to try to answer some of the unresolved issues in the debate over the relative merits of social health insurance and tax financed health systems this paper employs regression based generalizations of the difference in differences method on panel data from 28 countries for the period 1990 2004 we find that controlling for any concurrent provider payment reforms adoption of social health insurance increased national health spending and hospital activity rates but did not lead to better health outcomes

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

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

why do markets move together an investigation of u s japan stock return comovements this article explores the fundamental factors that affect cross country stock return correlations using transactions data from 1988 to 1992 we construct overnight and intraday returns for a portfolio of japanese stocks using their nyse traded american depository receipts adrs and a matched sample portfolio of u s stocks we find that u s macroeconomic announcements shocks to the yen dollar foreign exchange rate and treasury bill returns and industry effects have no measurable influence on u s and japanese return correlations however large shocks to broadbased market indices nikkei stock average and standard and poor s 500 stock index positively impact both the magnitude and persistence of the return correlations stock return cross country covariances play a key role in international finance changes in these covariances affect the volatility of portfolios and asset prices as these covariances increase one expects that a fewer domestic risks are internationally diversifiable so portfolio volatility increases b the risk premium on the world market portfolio increases 1 c the cost of capital increases for individual firms and d the domestic version of the capm becomes increasingly inadequate 2 despite the important economic consequences of changes in cross country covariances the determinants of the levels and dynamics of these covariances have been little studied from an academic

progressivity horizontal inequality and reranking caused by health system financing a decomposition analysis for switzerland abstract this paper presents an application of the duclos et al duclos j y jalbert v araar a 2003 classical horizontal inequity and reranking an integrated approach research on economic inequality 10 65 100 decomposition to an analysis of the 1998 swiss health system financing we see that in addition to measuring horizontal inequality in the classical sense this decomposition is more efficient and flexible than earlier ones it is also pointed out that methods involving a nonparametric estimation lead to asymptotically biased vertical and horizontal effects a procedure to estimate this bias is given finally it is shown that despite a major reform health system financing is still very regressive and social health insurance is more regressive than direct financing

the failure of models that predict failure distance incentives and defaults statistical default models widely used to assess default risk fail to account for a change in the relations between different variables resulting from an underlying change in agent behavior we demonstrate this phenomenon using data on securitized subprime mortgages issued in the period 1997 2006 as the level of securitization increases lenders have an incentive to originate loans that rate high based on characteristics that are reported to investors even if other unreported variables imply a lower borrower quality consistent with this behavior we find that over time lenders set interest rates only on the basis of variables that are reported to investors ignoring other credit relevant information as a result among borrowers with similar reported characteristics over time the set that receives loans becomes worse along the unreported information dimension this change in lender behavior alters the data generating process by transforming the mapping from observables to loan defaults to illustrate this effect we show that the interest rate on a loan becomes a worse predictor of default as securitization increases moreover a statistical default model estimated in a low securitization period breaks down in a high securitization period in a systematic manner it underpredicts defaults among borrowers for whom soft information is more valuable regulations that rely on such models to assess default risk could therefore be undermined by the actions of market participants

the efficiency of monetary exchange in search equilibrium search theoretic models of money emphasize monetary exchange as the outcome of economic environments characterized by bilateral trading frictions this paper analyzes the efficiency of monetary exchange in a search model of fiat money where individuals invest costly effort in the exchange process because the optimal effort each individual trader invests in exchange is based upon the private rather than social gains from trade decentralized monetary equilibria are shown to be inefficient relative to the social optimum however for an appropriate division of the gains from trade given to buyers and sellers it is possible to attain social efficiency the nature of these search externalities for monetary exchange and their implications for policy are evaluated and discussed copyright 1997 by ohio state university press

does the current account still matter do global current account imbalances still matter in a world of deep international financial markets where gross two way financial flows often dwarf the net flows measured in the current account contrary to a complete markets or consenting adults view of the world large current account imbalances while very possibly warranted by fundamentals and welcome can also signal elevated macroeconomic and financial stresses as was arguably the case in the mid 2000s furthermore the increasingly big valuation changes in countries net international investment positions while potentially important in risk allocation cannot be relied upon systematically to offset the changes in national wealth implied by the current account the same factors that dictate careful attention to global imbalances also imply however that data on gross international financial flows and positions are central to any assessment of financial stability risks the balance sheet mismatches of leveraged entities provide the most direct indicators of potential instability much more so than do global imbalances though the imbalances may well be a symptom that deeper financial threats are gathering