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February 28, 2015

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Posted: 28 Feb 2015 12:06 AM PST

'Credit Supply and the Housing Boom'

Posted: 27 Feb 2015 12:17 PM PST

Alejandro Justiniano, Giorgio Primiceri, and Andrea Tambalotti at Vox EU:

Credit supply and the housing boom: ... Conclusion In this column, we argued that any reconstruction of the fundamental causes of the housing and credit boom that preceded the Great Recession must be consistent with four stylised facts: house prices and debt surged, the ratio of debt to house values was roughly constant, and real mortgage rates fell. From the perspective of these four facts, explanations that rely exclusively on an increase in credit demand associated with more generous credit conditions—for instance in the form of higher loan-to-value ratios—are lacking. On the contrary, a shift in credit supply associated with the emergence of securitisation and shadow banking, is qualitatively and quantitatively consistent with the four facts.
This interpretation of the macroeconomic facts has the additional merit of being consistent with the micro-econometric evidence of Mian and Sufi (2009 and 2010). They show that an expansion in credit supply was the fundamental driver of the surge in household debt, and that borrowing against the increased value of real estate accounts for a significant fraction of this build-up in debt.
Shifting the focus of the inquiry into the causes of the boom from credit demand to credit supply has potentially important implications for the study of macro-prudential policy, since much of the literature on this topic has tended to model the boom as stemming from looser borrowing constraints. Exploring the normative implications of the alternative view proposed in this article is an exciting avenue for future research.

Paul Krugman: What Greece Won

Posted: 27 Feb 2015 09:27 AM PST

How well did Greece do?:

What Greece Won, by Paul Krugman, Commentary, NY Times: Last week, after much drama, the new Greek government reached a deal with its creditors. ... So how did it go?
Well, if you were to believe many of the news reports and opinion pieces of the past few days, you'd think that it was a disaster... Some factions within Syriza apparently think so, too. But it wasn't. ... Greece came out of the negotiations pretty well, although the big fights are still to come. ...
To make sense of what happened, you need to understand that the main issue of contention involves just one number: the size of the Greek primary surplus, the difference between government revenues and government expenditures not counting interest on the debt. The primary surplus measures the resources that Greece is actually transferring to its creditors. ...
Syriza has always been clear that it intends to keep running a modest primary surplus. If you are angry that the negotiations didn't make room for a full reversal of austerity, a turn toward Keynesian fiscal stimulus, you weren't paying attention.
The question instead was whether Greece would be forced to impose still more austerity. The previous Greek government had agreed to a program under which the primary surplus would triple over the next few years, at immense cost to the nation...
Why would any government agree to such a thing? Fear ... that the creditors would cut off their cash flow or, worse yet, implode their banking system if they balked at ever-harsher budget cuts.
So did the current Greek government back down and agree to aim for those economy-busting surpluses? No, it didn't. In fact, Greece won new flexibility for this year, and the language about future surpluses was obscure. ... And the creditors ... made financing available to carry Greece through the next few months. ...
Why, then, all the negative reporting..., nothing that just happened justifies the pervasive rhetoric of failure. Actually, my sense is that we're seeing an unholy alliance here between left-leaning writers with unrealistic expectations and the business press, which likes the story of Greek debacle because that's what is supposed to happen to uppity debtors. But there was no debacle. Provisionally, at least, Greece seems to have ended the cycle of ever-more-savage austerity..., the first real debtor revolt against austerity is off to a decent start, even if nobody believes it. What's the Greek for "Keep calm and carry on"?

Have Blog, Will Travel

Posted: 27 Feb 2015 09:06 AM PST

I am here today:

NATIONAL BUREAU OF ECONOMIC RESEARCH, INC.
EF&G Research Meeting
Manuel Amador and Andrea Eisfeldt, Organizers
February 27, 2015
Federal Reserve Bank of San Francisco
101 Market Street
San Francisco, CA

PROGRAM

8:30 am Continental Breakfast

9:00 am
Pablo Kurlat, Stanford University and NBER
Asset Markets with Heterogeneous Information

Discussant:  Veronica Guerrieri, University of Chicago and NBER

10:00 am Break

10:15 am
Johannes Stroebel, New York University
Joseph Vavra, University of Chicago and NBER
House Prices, Local Demand, and Retail Prices

Discussant:  John Leahy, New York University and NBER

11:15 am Break

11:30 am
Daniel Greenwald, New York University
Martin Lettau, University of California at Berkeley and NBER
Sydney Ludvigson, New York University and NBER
Origins of Stock Market Fluctuations
Discussant:  John Cochrane, University of Chicago and NBER

12:30 pm Lunch

1:30 pm
Fatih Guvenen, University of Minnesota and NBER
Fatih Karahan, Federal Reserve Bank of New York
Serdar Ozkan, University of Toronto, Jae Song, Social Security Administration
What Do Data on Millions of US Workers Reveal About Life-Cycle Earnings Risk?
Discussant:  Luigi Pistaferri, Stanford University and NBER

2:30 pm Break

2:45 pm
Thomas Philippon, New York University and NBER
Philippe Martin, Sciences Po
Inspecting the Mechanism: Leverage and the Great Recession in the Eurozone
Discussant:  Pierre-Olivier Gourinchas, University of California at Berkeley and NBER

3:45 pm Break

4:00 pm
Rabah Arezki, International Monetary Fund
Valerie Ramey, University of California at San Diego and NBER
Liugang Sheng, Chinese University of Hong Kong
News Shocks in Open Economies: Evidence from Giant Oil Discoveries

Discussant:  Nir Jaimovich, Duke University and NBER

5:00 pm Adjourn

5:15 pm Reception and Dinner

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