The housing market is important for many developed economies, not least in the UK. This column presents new research in search and matching modelling suggesting that the quality of a house-buying match is important in understanding not only the time taken to sell a house, but also the length of time homeowners will live in the new house before their next move. The research should provide economists with new insights into housing market dynamics.
The standard economic argument in favour of a uniform carbon price is efficiency – all agents face the same marginal cost of pollution. Such a price can be achieved either by an emissions trading (cap-and-trade) system or by imposing a tax. This column argues that whether a uniform policy or a mixture of both is optimal depends on a few factors, and most importantly on the nature of stochastic shocks affecting the economy.
Most sub-Saharan African countries have adopted minimum wage laws. This column argues that this will become increasingly significant for the economy as a whole as the number of covered workers grows, with possible spillover effects to uncovered sectors. Importantly, sub-Saharan Africa displays a bias towards a more aggressive minimum policy relative to the rest of the world. Perhaps due to this, compliance is not very high and the economic consequences of minimum wages are not particularly strong.
We need a strong and resilient global financial safety net to reduce the systemic implications of sovereign crises and allow nations to cope with shocks in order to reap the economic rewards of an integrated system of trade and finance. This column argues that the current arrangements are suboptimal – resembling more of a patchwork than a safety net. Drawing on the experience of central banks during the financial crisis, it offers preliminary policy proposals to enhance the effectiveness of the global financial safety net.
Emerging market firms have borrowed in foreign currency to take advantage of low interest rates. This column argues that when the Fed inevitably raises rates, such borrowing will be a threat to emerging economy financial systems. Yet so long as authorities use their existing prudential tools wisely, the risks appear manageable.
Other Recent Columns:
- Market liquidity in liquid markets: Pitfalls and trends
- Errors as a source of macroeconomic frictions
- Volatility, financial crises and Minsky's hypothesis
- A new international database on financial fragility
- ‘Home Affordable Refinancing Program’: Impact on borrowers
- The costs of interest rate liftoff for homeowners: Why central bankers should focus on inflation
- Policy-driven premature deindustrialisation in Malaysia
- Finance and growth – beware the measurement
- The diffusion of European diesel automobiles
- The political economy of liberal democracy
- Measuring the interest premium for past default
- Low interest rates, capital flows, and declining productivity in South Europe
- The state of climate negotiations
- Regulatory arbitrage in action: Evidence from cross-border lending
- Foreign entry and domestic innovation
- Emergency liquidity assistance and Greek banks’ bankruptcy
- Retirement and changing lifestyle habits
- Greek debt remains unsustainable
- Dispelling three myths on economics in Germany
- Academy schools and pupil performance