Hedging Housing Risk in London

This paper investigates the benefits of allowing households to compensate the portfolio distortion due to their housing consumption through investments in housing price derivatives. Focusing on the London market, we show that a major loss from over-investment in housing is that households are forced to hold a very risky portfolio. However, the strong performance of the London housing market means that little is lost in terms of expected returns. Even households with limited wealth are better off owning their home rather than renting and investing in financial assets, as long as they are willing to face the financial risk involved. In this context, access to housing price derivatives would benefit most poor homeowners looking to limit their risk exposure. It would also benefit wealthier investors looking for the high returns provided by housing investments without the costs of direct ownership of properties. Comparisons with French, Swedish and U.S. data provide a broader perspective on our findings.     

Gender Differences in Financial Education: Evidence from Primary School

Today, financial and economic education is a primary issue in academia and among policy makers, and there is great interest towards programmes that are able to boost it. In this paper, we test whether a programme (“treatment”) of financial education on savings, targeted to children aged 8 and 9 is effective and to what extent. We measure the interest rate required by the children before and after the treatment to accept postponing a reward, computing its variation and comparing this with that of a control group. We find evidence that the overall initiative is helpful in decreasing the level of impatience of children and the number of inconsistent choices of boys. Our findings invite to reflect on the gender neutrality of programmes of financial education.     

Likelihood evaluation of models with occasionally binding constraints

Applied researchers interested in estimating key parameters of dynamic stochastic general equilibrium models face an array of choices regarding numerical solution and estimation methods. We focus on the likelihood evaluation of models with occasionally binding constraints. We document how solution approximation errors and likelihood misspecification, related to the treatment of measurement errors, can interact and compound each other.     

The Euro — A Tale of 20 Years: What Are the Priorities Going Forward?

Intereconomics - First, we need to recall the initial objectives set for the euro and how these have changed over time, notably due to the weaknesses that came to the fore throughout the recent...     

Identification of monetary policy in SVAR models: a data-oriented perspective

In the literature using short-run timing restrictions to identify monetary policy shocks in vector-auto-regressions (VAR) there is a debate on whether (i) contemporaneous real activity and prices or (ii) only data typically observed with high frequency should be assumed to be in the information set of the central bank when the interest rate decision is taken. This paper applies graphical modeling theory, a data-based tool, in a small-scale VAR of the US economy to shed light on this issue. Results corroborate the second type of assumption.     

Book Review

The diffusion of the Internet is becoming a central policy issue for developing countries, being identified by scholars as a key driver of knowledge, innovation and development. Remarkably, the related literature is scarce and fragmented. In order to contribute to fill this gap, we analyse Internet access and usage patterns in seven Latin American countries. In addition to the traditional socio-economic determinants of Internet access, the results also suggest an important role for network effects, presence of students at households and complementarities in Internet use at different locations. Concerning usage, estimations show that Internet access does not translate automatically into usage. In particular, females are found to be less likely to use the Internet, even once access is provided. Finally, the evidence suggests that while technological skills are necessary to fully exploit Internet potentialities, individuals located in rural areas are more likely to use the Internet for education purposes, confirming the potential connectivity impact on human capital.