Monetary policy and long-term trends

Charles A.E. Goodhart, Philipp Erfurth 03 November 2014

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Introduction

There has been a long-term downward trend in the share and strength of labour in national income, which is depressing both demand and inflation. This has prompted ever more expansionary monetary policies. While understandable, indeed appropriate, within a short-term business cycle context, this has exacerbated longer-term trends, increasing inequality and financial distortions. Perhaps the most fundamental problem has been over-reliance on debt finance (leverage).

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Topics:  Financial markets Macroeconomic policy Monetary policy

Tags:  monetary policy, Inequality, debt, leverage, wages, labour share, globalisation, consumption, propensity to consume, fiscal policy, Ageing, interest rates, investment, asset prices, housing, house prices, exchange rates, global crisis, mortgages, sub-prime crisis, Macroprudential policy, structural reforms, balance sheets, deleveraging, equity, shared-equity mortgages, Help to Buy

Home prices since 1870: No price like home

Katharina Knoll, Moritz Schularick, Thomas Steger 01 November 2014

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For economists there is no price like home – at least not since the global financial crisis. Fluctuations in house prices, their impact on the balance sheets of consumers and banks, as well as the deleveraging pressures triggered by house price busts have been a major focus of macroeconomic research in recent years (Mian and Sufi 2014, Jordà et al. 2014, Shiller 2009).

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Topics:  Economic history Financial markets

Tags:  housing, house prices, global crisis, land prices, transport costs, transport revolution, land-use restrictions, zoning laws, Inequality

Capital is not back: A comment on Thomas Piketty’s ‘Capital in the 21st Century’

Odran Bonnet, Pierre-Henri Bono, Guillaume Camille Chapelle, Étienne Wasmer 30 June 2014

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The impressive success of Thomas Piketty’s book (Piketty 2014) shows that inequality is a great concern in most countries. His claim that “capital is back”, because the ratio of capital over income is returning to the levels of the end of the 19th century, is probably one of the most striking conclusions of his 700 pages. Acknowledging the considerable interest of this book and the effort it represents, we nevertheless think this conclusion is wrong, due to the particular way capital is measured in national accounts.

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Topics:  Global economy

Tags:  house prices, housing, Inequality, rents, housing bubble, capital, wealth inequality

Why are savings so high among the young in urban China?

Mark R. Rosenzweig, Junsen Zhang 21 May 2014

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A well-known phenomenon in contemporary China is the high personal savings rates of households compared with those in developed countries and many low-income countries. A less-studied aspect of this is the elevated savings rates of the young relative to the middle-aged, first shown by Chamon and Prasad (2010) based on urban household data covering the years 1986–2005 for ten provinces.

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Topics:  Frontiers of economic research Global economy

Tags:  China, housing, family, savings, one-child policy

The housing-market impacts of shale-gas development

Lucija Muehlenbachs, Beia Spiller, Christopher Timmins 09 February 2014

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Technological improvements in the extraction of natural gas from shale rock have transformed the industry.

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Topics:  Energy Environment

Tags:  house prices, housing, externalities, pollution, property prices, shale gas, fracking

Dark side of housing-price appreciation

Indraneel Chakraborty, Itay Goldstein, Andrew MacKinlay 25 November 2013

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Policymakers around the world often worry about decreases in real-estate prices and other asset prices, and take measures to prevent them. For example, in the aftermath of the financial crisis, the Federal Reserve has engaged in large-scale asset purchases – especially of mortgage-backed assets – to support the housing market and, in turn, the overall economy.

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Topics:  Financial markets Monetary policy

Tags:  housing, Federal Reserve, investment, asset prices, banks, lending, real estate

Speculative investors and transaction tax in the housing market

Yuming Fu, Wenlan Qian, Bernard Yeung 07 November 2013

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The Global Financial Crisis revived the idea of using transaction taxes to discourage short-term speculative trades. Such trading is often blamed for causing excess volatility in financial markets. Tobin (1978) proposed the tax more than 40 years ago, to “throw some sand in the wheels of speculation”, specifically for currency trading. The idea has been extended to all forms of financial transactions.

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Topics:  Financial markets

Tags:  housing, asset prices, financial transaction tax, stamp duty, Singapore

Exports and property prices: Are they connected?

Balázs Égert, Rafał Kierzenkowski 02 October 2013

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A marked decline in France’s export-market shares

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Topics:  Europe's nations and regions International trade

Tags:  France, housing, exports, real estate

Real-estate valuation, current-account and credit growth patterns, before and after the 2008-09 Crisis

Joshua Aizenman, Yothin Jinjarak 02 July 2013

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The Global Crisis sparked a vibrant debate about what factors contributed to the Crisis. One question remains central to the debate:

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Topics:  Global crisis

Tags:  housing, real estate, credit growth

Escaping liquidity traps: Lessons from the UK’s 1930s escape

Nicholas Crafts 12 May 2013

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In mid-1932, the UK had experienced a recession of a similar magnitude to that of 2008-09, was engaged in fiscal consolidation that reduced the structural budget deficit by about 4% of GDP, had short-term interest rates that were close to zero, and was in a double-dip recession (Crafts and Fearon 2013). The years from 1933 through 1936 saw a very strong recovery with growth of over 4% in every year. The Chancellor of the Exchequer, Neville Chamberlain (in office from November 1931 to May 1937) was the architect of this recovery.

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Topics:  Europe's nations and regions

Tags:  housing, Britain, UK, Eurozone crisis, house building

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