house price dynamics with dispersed information abstract we use a user cost model to study how dispersed information affects the equilibrium house price in the model agents are disparately informed about local economic conditions consume housing services and speculate on price changes optimists who expect high house price growth buy in anticipation of capital gains pessimists who expect capital losses prefer to rent because of short selling constraints on housing pessimistic expectations are not incorporated in the price of owned houses and the equilibrium price is higher and more volatile relative to the benchmark case of common information we present evidence supporting the model s predictions in a panel of us cities

international evidence on the determinants of foreign exchange rate exposure of multinational corporations in this paper we explore some of the potential determinants of foreign exchange fx exposure and firm value we contribute to previous research on stock returns and firm value as we have access to a unique survey database and can include as determinants in our empirical analysis the objectives and emphasis on risk management as well as considering previous factors including the nature of the business environment we can also examine any regional influences as our sample includes uk us and asia pacific multinational companies mncs as predicted by theory we find some evidence that mncs with greater foreign operations have a larger magnitude of fx exposure however our proxy for the emphasis of fx management does not have the predicted negative association with the magnitude of fx indicating that managers may focus on short term cash flows in their fx management rather than firm value with regard to the potentially differential regional role of our variables a range of interesting results is found arguably in our most notable such finding we see that the contribution of overseas business to total revenues has no association with the magnitude of fx exposure for us mncs it has a positive role for uk mncs consistent with theory and a negative role for asia pacific mncs which could be explained by macroeconomic and or financial characteristics of the mncs in the sample

residential vertical rent curves abstract we estimate the equilibrium bid rent function for vertical locations within residential buildings using geocoded rental price data we find that the vertical rent curve is non monotonic with respect to floor level specifically residential bidders pay a 1 5 to 3 5 ground floor premium for the remaining vertical locations the slope of the vertical rent curve is positive with respect to floor level our analysis shows that the ground floor premium is indeed a valuation of access similar to the valuation of access to the central business district cbd in a monocentric setting based on the cities in our sample the ground floor premium is roughly equivalent to moving between 250 450 m closer to the cbd the positive slope of the vertical rent curve with respect to floor level is predominately explained by amenities e g views that compensate residents for the lack of easy access to the street furthermore our analysis provides evidence of an equilibrium relationship between rental prices and proximity to initially high priced areas that is consistent with rental price spillovers more precisely dwellings at higher vertical locations exhibit stronger rental price growth if they are located closer to an initially expensive neighborhood compared to dwellings on lower floor levels

foreclosures house prices and the real economy from 2007 to 2009 states without a judicial requirement for foreclosures were twice as likely to foreclose on delinquent homeowners analysis of borders of states with differing foreclosure laws reveals a discrete jump in foreclosure propensity as one enters nonjudicial states using state judicial requirement as an instrument for foreclosures we show that foreclosures led to a large decline in house prices residential investment and consumer demand from 2007 to 2009 as foreclosures subsided from 2011 to 2013 the foreclosure rates in nonjudicial and judicial requirement states converged and we find some evidence of a stronger recovery in nonjudicial states

fool s gold the impact of venezuelan currency devaluations on multinational stock prices this paper documents negative cumulative abnormal returns cars to five exchange rate devaluations in venezuela within the context of stiff exchange controls and large black market premiums using daily stock prices for 110 multinational corporations with venezuelan subsidiaries the results suggest evidence of statistically and economically significant negative cars of up to 2 07 percent over the ten day event window we find consistent results using synthetic controls to causally infer the effect of each devaluation on the stock prices of global firms active in the country at the time of the event our results are at odds with the predictions of the efficient market hypothesis stating that predictable devaluations should not affect the stock prices of large multinational companies on the day of the event and even less so when they happen in small countries we interpret these results as a suggestive indication of market inefficiencies in the process of asset pricing

minimum wages and the wage distribution in estonia abstract this article studies how changes in the statutory minimum wage have affected the wage distribution in estonia a post transition country with little collective bargaining and relatively l

accounting for central neighborhood change 1980 2010 abstract after 1980 2000 population decline and economic stagnation downtown neighborhoods in most large us cities experienced 2000 2010 population growth and gentrification stark racial differences in valuations of downtown amenities and suburban labor market opportunities among those with less than college that only emerged after 2000 are the primary drivers of these downtown neighborhood dynamics as college educated whites moved in increases in valuations of downtown amenities encouraged other whites to remain in downtowns a reversal from prior decades continued departures of less than college educated minorities were driven both by relative improvements in suburban employment opportunities for this group and their continued declines in valuations of downtown amenities our evidence highlights the importance of racial differences in valuations of potentially endogenous local amenities for understanding recent downtown gentrification

natural amenities neighbourhood dynamics and persistence in the spatial distribution of income we present theory and evidence highlighting the role of natural amenities in neighbourhood dynamics suburbanization and variation across cities in the persistence of the spatial distribution of income our model generates three predictions that we confirm using a novel database of consistent boundary neighbourhoods in u s metropolitan areas 1880 2010 and spatial data for natural features such as coastlines and hills first persistent natural amenities anchor neighbourhoods to high incomes over time secondly naturally heterogeneous cities exhibit persistent spatial distributions of income thirdly downtown neighbourhoods in coastal cities were less susceptible to the widespread decentralization of income in the mid twentieth century and experienced an increase in income more quickly after 1980

endogenous gentrification and housing price dynamics in this paper we begin by documenting substantial variation in house price growth across neighborhoods within a city during citywide housing price booms we then present a model which links house price movements across neighborhoods within a city and the gentrification of those neighborhoods in response to a citywide housing demand shock a key ingredient in our model is a positive neighborhood externality individuals like to live next to richer neighbors this generates an equilibrium where households segregate based upon their income in response to a citywide demand shock higher income residents will choose to expand their housing by migrating into the poorer neighborhoods that directly abut the initial richer neighborhoods the in migration of the richer residents into these border neighborhoods will bid up prices in those neighborhoods causing the original poorer residents to migrate out we refer to this process as endogenous gentrification using a variety of data sets and using bartik variation across cities to identify city level housing demand shocks we find strong empirical support for the model s predictions

the housing market s of san diego this paper uses an assignment model to understand the cross section of house prices within a metro area movers demand for housing is derived from a lifecycle problem with credit market frictions equilibrium house prices adjust to assign houses that dier by quality to movers who dier by age income and wealth to quantify the model we measure distributions of house prices house qualities and mover characteristics from micro data on san diego county during the 2000s boom the main result is that cheaper credit for poor households was a major driver of prices especially at the low end of the market

creative destruction barriers to urban growth and the great boston fire of 1872 urban growth requires the replacement of outdated buildings yet growth may be restricted when landowners do not internalize positive spillover effects from their own reconstruction the boston fire of 1872 created an opportunity for widespread simultaneous reconstruction initiating a virtuous circle in which building upgrades encouraged further upgrades of nearby buildings land values increased substantially among burned plots and nearby unburned plots capitalizing economic gains comparable to the prior value of burned buildings boston had grown rapidly prior to the fire but negative spillovers from outdated durable buildings had substantially constrained its growth by dampening reconstruction incentives

the response of multinationals foreign exchange rate exposure to macroeconomic news abstract we use intraday data to estimate the daily foreign exchange exposure of u s multinationals and show that macroeconomic news affects these firms foreign exchange exposure news creates a substantial shift in the joint distribution of stock and exchange rate returns that has both a transitory and a persistent component for example a positive domestic demand surprise as reflected in higher than expected nonfarm payroll increases the value of the low exposure domestic activities and results in a persistent decrease in foreign exchange exposure

arrested development theory and evidence of supply side speculation in the housing market this paper incorporates speculation into the standard supply and demand framework used to analyze housing booms and busts speculation reverses the common intuition that elastic housing supply attenuates housing booms housing market frictions make land a more attractive speculative investment than housing as a result undeveloped land both facilitates construction and intensies

exchange rate exposure and industry characteristics evidence from canada japan and the usa abstract this paper examines industry level exchange rate exposures for canada japan and the usa measuring exposure by adding the change in the exchange rate to the domestic market model of industry portfolio returns some industries in all three countries display significant exposures moreover for each country the exchange rate is important for explaining industry returns at the economy wide level to explore whether exchange rate exposures are systematically linked to the activities of the industries we model exposure as a function of industry characteristics for all three countries the relation between exposure and industry characteristics is broadly consistent with economic theory jel f3

interjurisdictional sorting and majority rule an empirical analysis the goal of this paper is to provide a comprehensive empirical analysis of majority rule and tiebout sorting within a system of local jurisdictions the idea behind the estimation procedure is to investigate whether observed levels of public expenditures satisfy necessary conditions implied by majority rule in a general equilibrium model of residential choice the estimator controls for observed and unobserved heterogeneity among households observed and unobserved characteristics of communities and the potential endogeneity of prices and expenditures as well as the self selection of households into communities of their choice we estimate the structural parameters of the model using data from the boston metropolitan area the empirical findings reject myopic voting models more sophisticated voting models based on utility taking provide a potential explanation of the main empirical regularities

income and wealth effects on private label demand evidence from the great recession we measure the causal effects of income and wealth on the demand for private label products prior research suggests that these effects are large and in particular that private label demand rises during recessions our empirical analysis is based on a comprehensive household level transactions database matched with price information from store level scanner data and wealth data based on local house value indices the great recession provides a key source of the variation in our data showing a large and geographically diverse impact on household incomes over time we estimate income and wealth effects using within variation of income at the household level and wealth at the zip code level our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization we establish a precisely measured negative effect of income on private label shares the effect of wealth is negative but not precisely measured however the estimated effect sizes

minimum wage effects throughout the wage distribution this paper provides evidence on a wide set of margins along which labor markets can adjust in response to increases in the minimum wage including wages hours employment and ultimately labor income not surprisingly the evidence indicates that low wage workers are most strongly affected while higher wage workers are little affected workers who initially earn near the minimum wage experience wage gains nevertheless their hours and employment decline and the combined effect of these changes on earned income suggests adverse consequences on net for low wage workers

estimation of foreign exchange exposure an application to mining companies in australia abstract using stock market data this paper measures the foreign exchange exposure of mining firms in australia traditionally thought to be very sensitive to exchange rate movements the estimation is conducted at several levels single equation estimation for individual stocks and for portfolios of stocks from the same industry group and multivariate regression the sensitivity of stock returns to exchange rate movements and proportion of stock returns explained by exchange rate movements are found to be small results from such analysis can be used to assess the effectiveness of existing hedge policies and the need for and benefits of additional hedging jel g15

old homes externalities and poor neighborhoods a model of urban decline and renewal abstract this paper investigates urban decline and renewal in the united states using three panels that follow neighborhoods on a geographically consistent basis over extended periods of time findings indicate that change in neighborhood economic status is common averaging roughly 13 percent per decade roughly two thirds of neighborhoods studied in 1950 were of quite different economic status fifty years later panel unit root tests for 35 msas indicate that neighborhood economic status is a stationary process consistent with long running cycles of decline and renewal in philadelphia county a complete cycle appears to last up to 100 years aging housing stocks and redevelopment contribute to these patterns as do local externalities associated with social interactions lower income neighborhoods appear to be especially sensitive to the presence of individuals that provide social capital many of the factors that drive change at the local level have large and policy relevant effects

the dax and the dollar the economic exchange rate exposure of german corporations this paper examines the economic exposure of german corporations to changes in the dm us dollar exchange rate our work contributes to the existing body of literature in the following ways firstly we point out conceptual problems of previous attempts to estimate economic exposure secondly we find that german firms are significantly exposed to changes in the dm us dollar rate however our results are unstable over time

credit supply and the price of housing we show that since 1994 branching deregulations in the u s have signi cantly af fected the supply of mortgage credit and ultimately house prices with deregulation the number and volume of originated mortgage loans increase while denial rates fall but the deregulation has no eect on a placebo sample formed of mortgage compa nies that should not be aected by the regulatory change this sharpens the causal interpretation of our results deregulation acts to relax access to mortgage credit and pushes the demand for house ownership outwards interestingly the fraction of securi tized mortgage loans remains unchanged through the process we nd evidence house prices rise with branching deregulation and particularly in metropolitan areas where construction is inelastic for topographic reasons we document these results in a large sample of counties across the u s we also focus on a reduced cross section formed by counties on each side of a state border where a regression discontinuity approach is possible our conclusions are strengthened jel classi cation numbers g21 g10 g12

tipping and the dynamics of segregation schelling dynamic models of segregation journal of mathematical sociology 1 1971 143 186 showed that extreme segregation can arise from social interactions in white preferences once the minority share in a neighborhood exceeds a tipping point all the whites leave we use regression discontinuity methods and census tract data from 1970 through 2000 to test for discontinuities in the dynamics of neighborhood racial composition we find strong evidence that white population flows exhibit tipping like behavior in most cities with a distribution of tipping points ranging from 5 to 20 minority share tipping is prevalent both in the suburbs and near existing minority enclaves in contrast to white population flows there is little evidence of nonlinearities in rents or housing prices around the tipping point tipping points are higher in cities where whites have more tolerant racial attitudes

asset pricing and the propagation of macroeconomic shocks this paper considers the implications of habit formation and financial frictions for the propagation of macroeconomic shocks in a model that is capable of matching asset pricing moments a short lived shock that destroys a small fraction of the economy s stock of pledgeable collateral generates a persistent recession a stock market crash and a flight to safety effect this novel mechanism creates a tight link between the asset pricing implications of macroeconomic models and their ability to propagate and amplify the effects of macroeconomic shocks

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

a simple model of subprime borrowers and credit growth abstract the surge in credit and house prices that preceded the great recession was particularly pronounced in zip codes with a higher fraction of subprime borrowers mian and sufi 2009 we present a simple model with prime and subprime borrowers distributed across geographic locations which can reproduce this stylized fact as a result of an expansion in the supply of credit due to their low income subprime households are constrained in their ability to meet interest payments and hence sustain debt as a result when the supply of credit increases and interest rates fall they take on disproportionately more debt than their prime counterparts who are not subject to that constraint

exchange rate exposure abstract in this paper we examine the relationship between exchange rate movements and firm value we estimate the exchange rate exposure of publicly listed firms in a sample of eight non us industrialized and emerging markets we find that exchange rate movements do matter for a significant fraction of firms though which firms are affected and the direction of exposure depends on the specific exchange rate and varies over time suggesting that firms dynamically adjust their behavior in response to exchange rate risk exposure is correlated with firm size multinational status foreign sales international assets and competitiveness and trade at the industry level

within city variation in urban decline the case of detroit when a city experiences a decline in either income or population do all neighborhoods within the city decline equally or do some neighborhoods within the city decline more than others if so what are the characteristics of the neighborhoods that decline the most in this paper we provide some answers to these questions by looking at what happened to different types of neighborhoods within the city of detroit as detroit experienced a sharp decline in average income and population from the 1980s to the late 2000s the large declines in population and aver age income during this period relative to other large cities make detroit a natural candidate to study the within city properties of urban decline we view our analysis through the recently developed model of guerrieri hartley and hurst 2011 hereafter ghh in that model individuals are endowed with either high or low income and all individuals have a prefer ence for living around richer neighbors this is a shorthand way to model individuals having preferences for amenities that are provided endogenously when neighborhood income rises such as lower crime more entertainment and

spikes and spill overs the impact of the national minimum wage on the wage distribution in a low wage sector the uk national minimum wage nmw has had a minimal impact on uk wage inequality because it has been set at a modest level and because aggregate evidence suggests very small spill over effects but the small spill over effects might be because of the small numbers of workers affected and widespread anticipation of the introduction of the nmw might make the impact effect appear very small this paper investigates these issues using data collected from care homes where the nmw affected 40 of workers but we still find no evidence of large spill over effects and very small amounts of anticipation of the nmw

housing market spillovers evidence from the end of rent control in cambridge massachusetts we measure the capitalization of housing market externalities into residential housing values by studying the unanticipated elimination of stringent rent controls in cambridge massachusetts in 1995 pooling data on the universe of assessed values and transacted prices of cambridge residential properties between 1988 and 2005 we find that rent decontrol generated substantial robust price appreciation at decontrolled units and nearby never controlled units accounting for a quarter of the 7 8 billion in cambridge residential property appreciation during this period the majority of this contribution stems from induced appreciation of never controlled properties residential investment explains only a small fraction of the total

the determinants and welfare implications of us workers diverging location choices by skill 1980 2000 abstract from 1980 to 2000 the rise in the us college high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage high rent cities this paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting while local labor demand changes fundamentally caused the increased skill sorting it was further fueled by endogenous increases in amenities within higher skill cities changes in cities wages rents and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone jel d31 i26 j24 j31 j61 r23

the exchange rate exposure of u s multinationals this article examines the exposure of u s multinationals to foreign currency risk evidence is presented that the relationship between stock returns and exchange rates differs systematically across multinationals given these results the study focuses on the determinants of exchange rate exposure the comovements between stock returns and the value of the dollar is found to be positively related to the percentage of foreign operations of u s multinationals copyright 1990 by the university of chicago

why has house price dispersion gone up we calibrate a dynamic general equilibrium island model to investigate the 30 year increase in the level of house prices and their dispersion across u s metropolitan areas the model is based on two main assumptions households o w in and out metropolitan areas in response to local productivity shocks and the housing supply cannot adjust instantly because of technological and regulatory constraints the calibration reveals that the observed tightening of housing supply regulation cannot quantitatively account for the rise in the level and dispersion of house prices in equilibrium workers o w out of tightly regulated towards less regulated metropolitan areas undoing most of the price impact of local supply restrictions in contrast the observed increase in wage dispersion across metropolitan areas does create the observed increase in the level and dispersion of house prices workers o w towards exceptionally productive metropolitan areas and drive house prices up the calibration also suggests that the welfare eects of housing supply regulation are large when wages become more dispersed

credit constraints and the composition of housing sales farewell to first time buyers during the housing bust of 2008 2009 housing prices and transaction volumes fell across the united kingdom while the drop in prices was similar across housing types transaction volumes fell more for units at the lower end of the market i document this fact and provide panel and instrumental variable estimates showing its link with tightening credit conditions in england and wales during 2008 i then use an overlapping generations framework to relate the change in the composition of sales with the reduction in loan to value ratios by british banks and to derive additional predictions as down payment requirements increase young households with scarce financial resources are priced out by older owners who retain their previous houses as rental properties when trading up recent changes in aggregate housing tenure disaggregated changes in renting and sales in areas with different age compositions are consistent with these predictions the results presented here show how the composition of sales changes over the housing cycle and may inform ongoing policy discussions about reduced access to home ownership by the young

exchange rate movements and the profitability of u s multinationals abstract this paper studies the effects of unexpected exchange rate movements on the stock returns of u s multinationals unlike most previous studies of exchange rate exposure we explicitly consider the time variability of exchange rate exposure by taking into account firms foreign sales and foreign production information in our tests empirical results based on a sample of eighty u s multinationals from seven 3 digit sic manufacturing industries show that the stock market correctly reveals the profitability effects of exchange rate news predicted by theory a depreciation shock to the u s dollar for example has significant positive effects on the abnormal returns on the stocks of the multinationals through foreign sales and significant negative effects through foreign production

housing booms and city centers popular discussions often treat the great housing boom of the 1996 2006 period as if it were a national phenomenon with similar impacts across locales but across metropolitan areas price growth was dramatically higher in warmer less educated cities with less initial density and higher initial housing values within metropolitan areas price growth was faster in neighborhoods closer to the city center the centralization of price growth during the boom was particularly dramatic in those metropolitan areas where income is higher away from the city center we consider a number of different explanations for this connection and find that the connection between centralized price growth and decentralized income seems to be most explained by the faster price growth in central cities that use relatively more public transit

using survey data to resolve the exchange risk exposure puzzle evidence from u s multinational firms while in previous literature foreign currency exposure is estimated to be surprisingly small and insignificant we question in this paper the rationality assumption and show that the traditional use of realized exchange rate changes to approximate unexpected currency shocks leads to a strong underestimation of the influence that exchange rates play in determining firm valuations in light of a unique survey data base of individual exchange rate expectations we distinguish between realized and unexpected foreign currency movements and find that half of our sample of 935 u s firms with real operations in foreign countries is significantly exposed to unexpected exchange rate movements in line with previously reported results foreign exchange risk exposure is found to become increasingly perceptible when the return horizon is lengthened the difference between the exposure to realized versus unexpected exchange rate movements is however decreasing when lengthening the horizon suggesting that the more market participants disagree about the future path of currency values the less investors and or managers are likely to use the publicly available forecasts in their pricing and hedging decisions

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

the impact of the minimum wage on other wages in this paper i explore how changes in the minimum wage affect various occupational wages i postulate that other wages increase for two reasons first firms try to mitigate the deterioration in a worker s relative wage which would cause him to reduce his work effort and second there is an increase in the demand for nonminimum wage workers wage adjustment patterns are examined to ascertain whether wage comparisons play a role in the adjustment process the empirical work shows a short run wage compression among white collar occupations which is consistent with the wage comparison model however large standard errors make inferences weak