Towards estimating the demand for money in China

The demand for money in China is estimated separately for the periods before and after the economic reform. Besides the traditional transactions demand variable, the expected rate of inflation (as a measure of the opportunity cost of holding money) and the monetization process are also incorporated into the demand function. The preliminary results show that the demand for money in China has changed in response to the institutional changes during the economic reform. Adding the monetization and inflation expectation variables into the money demand function has enhanced significantly its explanatory power.     

The baby boom,the baby bust,and the housing market

This paper explores the impact of demographic changes on the housing market in the US, 1st by reviewing the facts about the Baby Boom, 2nd by linking age and housing demand using census data for 1970 and 1980, 3rd by computing the effect of demand on price of housing and on the quantity of residential capital, and last by constructing a theoretical model to plot the predictability of the jump in demand caused by the Baby Boom. The Baby Boom in the U.S. lasted from 1946-1964, with a peak in 1957 when 4.3 million babies were born. In 1980 19.7% of the population were aged 20-30, compared to 13.3% in 1960. Demand for housing was modeled for a given household from census data, resulting in the finding that demand rises sharply at age 20-30, then declines after age 40 by 1% per year. Thus between 1970 and 1980 the real value of housing for an adult at any given age jumped 50%, while the real disposable personal income per capita rose 22%. The structure of demand is such that the swelling in the rate of growth in housing demand peaked in 1980, with a rate of 1.66% per year. Housing demand and real price of housing were highly correlated and inelastic. If this relationship holds in the future, the real price of housing should fall about 3% per year, or 47% by 2007. The theoretical model, a variation of the Poterba model, ignoring inflation and taxation, suggests that fluctuations in prices caused by changes in demand are not foreseen by the market, even though they are predictable in principle 20 years in advance. As the effects of falling housing prices become apparent, there may be a potential for economic instability, but people may be induced to save more because their homes will no longer provide the funds for retirement.     

Forecast Summary

The lower exchange rate offers UK industry a remarkable competitive advantage in world markets which, we believe, will be expanding rapidly over the next two years. As domestic demand is also likely to be strong in the run-up to the General Election, output is forecast to rise 3 per cent both next year and in 1988. But, even so, the short-term supply response is not expected to be sufficient to prevent the current account from recording a large deficit next year. Excess demand pressures also point to a higher rate of inflation from now on. We forecast a steady increase in inflation to 3¾ Aper cent by the end of next year and a peak of 4½ per cent in late 1988.     

Fisher equations inverted and not

Regressions of the realized real after-tax interest rate on theex post rate of inflation are shown to be incapable of discriminating between the competing hypotheses that the real after-tax interest rate is not effected by expected inflation due to the substitutability between debt and equity (the Fisher hypothesis); and, that the nominal after-tax interest rate is not effected by expected inflation due to the substitutability between money and debt (the inverted Fisher hypothesis). An alternative regression which is so capable, is shown to reject the inverted and support the original Fisher hypothesis.     

THE SIZE OF HOUSING SUBSIDIES IN CHINA*

Inexhaustible, strong demand for housing, which is generated from the current low rents and the work-unit-distribution housing system, has caused permanent housing shortages in China's urban sector. It is also one of the main sources of China's cost-push inflation. The transition from public to private saving, which is included in current housing reform, is the only way to solve the housing problems facing the country. Calculation of the size of housing subsidies is the very foundation of any housing reform program. Based on my estimates, the annual housing subsidy per woker expanded 8.6 limes during the period from 1978 to 1988, increasing at an anual rate of 24.1%. Total housing subsidies expanded 12.4 times, rising at an annual rate of 28.6%. Relative to GNP, the housing subsidies grew from 1.3% to 4.2% during the period. The rapid expansion of housing subsidies has several significant policy implications for China's economy. These include the need for reappraising real worker income identifying the enlarged portion of revenue in kind, and recalculating housing consumption.     

A dymimic model of housing price determination

This paper presents and estimates a model of the resale housing market. The data are a cross-section of monthly time series obtained from the multiple-listing service for a suburb of San Diego. The model is specified and estimated as a dynamic multiple indicator multiple cause system of equations where the capitalization rate is taken to be an unobservable time series to be estimated jointly with the unknown parameters. These are estimated by maximum likelihood using an EM algorithm based upon Kalman filtering and smoothing.The specification of the model features hedonic equations for each house sale and a dynamic equation for the capitalization rate which is constrained to make the expectation of prices equal the present value of the net returns to home ownership whenever the economic variables stabilize at steady state values. Out of steady state, the capitalization rate slowly adapts to new information.The model attributes a large portion of housing price increases of the 1970's to a fall in the capitalization rate which in turn was driven by rental inflation, tax rates and mortgage rates. Post-sample simulations indicate an initial flattening of housing inflation rates and later a fall brought on by the increase in steady state capitalization rates. In-sample simulations show that although both Proposition 13 and the inflation induced rise in the marginal income tax rates provided partial explanations for the fall in capitalization rates, the single most important factor was the acceleration in price of housing services which interacted with the tax treatment of home ownership to produce an amazing 18% average annual rate of price increase over the last seven years of the 1970's.     

Monetary policy,housing rents,and inflation dynamics

In this paper we study the effect of monetary policy shocks on housing rents. Our main finding is that, in contrast to house prices, housing rents increase in response to contractionary monetary policy shocks. We also find that, after a contractionary monetary policy shock, rental vacancies and the homeownership rate decline. This combination of results suggests that monetary policy may affect housing tenure decisions (own versus rent). In addition, we show that, with the exception of the shelter component, all other main components of the consumer price index (CPI) either decline in response to a contractionary monetary policy shock or are not responsive. These findings motivated us to study the statistical properties of alternative measures of inflation that exclude the shelter component. We find that measures of inflation that exclude shelter have most of the statistical properties of the widely used measures of inflation, such as the CPI and the price index for personal consumption expenditures, but have higher standard deviations and react more to monetary policy shocks. Finally, we show that the response of housing rents accounts for a large proportion of the “price puzzle” found in the literature.     

How should monetary policy respond to changes in the relative price of oil? Considering supply and demand shocks

This paper examines optimal monetary policy in a New Keynesian model where supply and demand shocks affect the price of oil. Optimal policy fully stabilizes core inflation when wages are flexible. The nominal rate rises (falls) in response to the demand (supply) shock. With sticky wages core inflation falls (rises) in response to the demand (supply) shock. Impulse response functions from a VAR estimated with post-1986 U.S. data show minimal movement in core inflation in response to both shocks. The federal funds rate rises (falls) in response to the demand (supply) shock, consistent with the predictions from the theoretical model for policy that stabilizes core inflation.     

A probabilistic approach to the structure of rental housing markets

A probabilistic view of the structure of urban housing markets is developed. The demand side is based on aggregate probabilistic demand functions derived from microbehavioral random utility theory. The supply side examines the short-run pricing of the housing stock by developing “asking rent theory,” which explains how a housing supplier must find the optimal rent that maximizes expected revenue. Next, concepts of aggregate market clearing and market equilibrium are defined. Finally, a two-submarket model with specific assumptions regarding the representation of demand and the nature of market signaling is examined in detail and is given a graphical illustration. In closing, directions for extending the probabilistic approach both within and beyond urban analysis are pointed out. All analysis in this paper is for a stationary urban economy, with the housing stock assumed fixed.     

不同类型调控政策对房地产市场影响的实证分析——以江苏省为例

近年来,国家对房地产宏观调控采取的多种政策,可划分为五类,即房地产开发投资规模、土地供应、金融信贷、住房供给结构、税收等政策。文中就这五类政策对房地产市场的影响进行了实证分析和定性分析。实证分析中采取了12个指标,利用了向量自回归模型和广义脉冲响应函数,就五类调控政策和市场形势对住房价格、成交量以及住房需求的影响时间和影响程度进行分析。定性分析中主要分析利率、税收、广义货币供应量M2、高房价等四个因素变化对住房价格、成交量以及住房需求的影响。     

我国通货膨胀与房地产价格的相关性研究

通货膨胀和房地产价格都是当前中国国民经济发展中遇到的热点问题,文章从探讨两者相关性出发,首先定性地讨论它们之间的有关理论和关系,然后通过实际数据,采用房地产价格、通货膨胀率、产出和利率等变量对其进行数据处理,再进行协整检验分析,由Granger因果检验得出我国房地产价格波动与通货膨胀率之间具有双向因果关系,最后给出了脉冲响应函数,得出结论：我国房地产价格波动与通货膨胀有一定的相关性。     

住房市场的刚性需求与投资需求测算——以北京市为例

对微观经济学中的需求价格弹性进行了修正,提出了测算住房市场中刚性需求和投资需求的方法,并实际测算了北京市住房市场的刚性需求和投资需求。结果表明,北京市住房市场刚性需求和投资需求的比例在每一年度都不尽相同,部分年份刚性需求占主导地位,部分年份投资需求占主导地位;同时,投资需求和住房价格增长率之间呈现很好的同步关系,在投资需求占主导地位的年份,住房价格增长速度明显加快。     

The paradox of rising wage growth and falling inflation

• ? Strong labour markets and rising wages in advanced economies stand in sharp contrast to recent declines in economists’ inflation forecasts and market expectations. In our view, though, these developments are not necessarily contradictory. Even if wage growth edges higher, we think demand factors will limit any pick‐up in prices. Instead, we expect firms’ margins will be squeezed.
• ? Although the labour share has risen more sharply than we had expected over the past couple of years, we are sceptical that this will translate into substantially stronger underlying inflation. Not only has the rise been small, it has been employment rather than wages that has surprised to the upside. The strength of employment is probably more about firms’ production preferences than workers’ capitalising on a stronger negotiating position.
• ? True, wages adjusted for productivity now look high by historical standards. But neither theory or empirical evidence suggests that this must inevitably lead to stronger CPI inflation in the short‐term. Our forecast for flat wage growth in 2019 and the absence of strong cost pressures elsewhere are also a comfort.
• ? Inflation tends to be more responsive to demand indicators – and the recent GDP growth soft patch suggests any further pick‐up in underlying inflation pressures will be limited (see Chart below).
• ? More generally, we think that the consensus view on inflation for the key advanced economies is high. Market‐based inflation expectations are typically lower than our own, which may reflect the perception that inflation risks are skewed to the downside. Positive economic surprises could lead downside risks to narrow, but ageing expansions and secular stagnation worries suggest this is unlikely, limiting any future pick‐up in bond yields.

     

Identifying the new Keynesian Phillips curve

Phillips curves are central to discussions of inflation dynamics and monetary policy. The hybrid new Keynesian Phillips curve (NKPC) describes how past inflation, expected future inflation, and a measure of real aggregate demand drive the current inflation rate. This paper studies the (potential) weak identification of the NKPC under Generalized Method of Moments and traces this syndrome to a lack of higher‐order dynamics in exogenous variables. We employ analytic methods to understand the economics of the NKPC identification problem in the canonical three‐equation, new Keynesian model. We revisit the empirical evidence for the USA, the UK, and Canada by constructing tests and confidence intervals based on the Anderson and Rubin ( 1949 ) statistic, which is robust to weak identification. We also apply the Guggenberger and Smith ( 2008 ) LM test to the underlying NKPC pricing parameters. Both tests yield little evidence of forward‐looking inflation dynamics. Copyright © 2008 John Wiley & Sons, Ltd.     

Housing and the Korean economy

This paper explores the nexus between housing and the Korean economy. It starts with an overview of the size, growth, and volatility of residential investment in conjunction with long-term resource allocation and short-term macroeconomic fluctuations. Then, the evolution of housing finance and its implications for recent house price run-up are discussed. The relationships among housing price, consumer spending, and inflation are also investigated. Particular attention is paid to the debate over house price bubbles, housing wealth effects on consumption, and the causality between house price and inflation. The paper concludes with a brief assessment of government intervention to stabilize house prices.     

A Long-Term Analysis of Regional Housing Markets and Inflation

This paper reexamines the relationship between inflation and residential property over a 30-year period. Using conventional OLS models and cointegration and causality models we examine regional markets in the United Kingdom. The OLS tests provide little evidence of a consistent and stable relationship, with large variations in the results between different regions. The cointegration results, and in particular those obtained using the Engle-Granger procedure, provide strong evidence to support the hypothesis that housing and inflation are cointegrated. Additionally, the causality results provide strong evidence to support the hypothesis that housing leads inflation.     

Property taxation and the demand for housing: An econometric analysis

There is disagreement among economists regarding the effect of a local increase in property taxation on the housing market. In defining the price of housing services studies of the demand for housing have treated the property tax exclusively as an excise tax on housing consumption. Two recent theoretical developments suggest this is a misrepresentation of the tax. One theory holds that the excise effects of property taxation may be shifted backward to the factors employed in the production of housing. The other theory concludes that the property tax is not an excise, but rather serves as an efficient price for local public services. To investigate these hypotheses, data from the Annual Housing Survey were employed to estimate a housing demand model which included the net effective property tax rate among the set of independent variables. In addition to revealing the property tax-housing demand relationship, the model provides more reliable estimates of income and price elasticities by eliminating specification errors found in previous studies. Results indicate that the property tax reduces the housing consumption of central city homeowners, but does not distort the suburban housing market.     

THE HOUSING MARKET AND THE RECOVERY

In the run up to the key Christmas period the talk is again of renewed weakness in consumer spending. Last month saw the volume of retail sales rise by only 0.1 per cent, and the annual rate of growth has now slowed to a shade over 3 per cent, down from its peak of 4.4 per cent back in July this summer. This weakness in consumer demand is also clearly being reflected in retail prices; with retailers discounting their prices to boost sales, headline inflation fell to 1.4per cent in October, while the underlying rate dropped to its lowest level for 25 years. This forecast release looks at the wider determinants of consumer spending, especially developments in the housing market. We argue that the slowdown in high street sales is a forbear of sluggish growth to come and that lower interest rates, if they materialise, are unlikely to have much of an impact. While consumer spending has been the driving force out of recession, for the recovery to be sustained, requires that exports and investment spending now take up the running.     

政府保障房供求补贴的不同效果

解决中低收入人群的基本住房问题是实现社会公平的基本国策之一。为了有效地实施保障性安居工程，通过构建数学模型研究在财政补贴率相同的条件下，住房消费补贴与住房供给补贴的成交价格、成交量与社会福利情况，可以发现这两者之间存在较大的差别，前者的成交价格、成交量和社会福利都高于后者，但前者比后者的财政补贴额更多。如果提高财政补贴率，那么前者成交价格会不断提高，而后者成交价格会不断降低，成交量都会呈现扩大趋势。成交价格、成交量和社会福利不但与财政补贴率及其补贴方式有关，也与住房的需求弹性和供给弹性有关。研究结论的政策意义在于，如果在政府财力有限、住房价格上涨压力较大的条件下，应当采用住房供给补贴；如果在政府财力相对宽松、住房价格上涨压力相对较小、依靠住房拉动经济增长的压力较大的条件下，则应当采用住房消费补贴，同时它还能实现公平与效率兼顾的目的。无论是采用住房消费补贴还是住房供给补贴，都应当增大供给弹性，减小需求弹性。     

House Prices, Housing Investment and Demography Forecasts from the LBS/Abbey National Model of the UK Housing Market

A new housing sector has been incorporated into the London Business School model. This article outlines the new housing model, summarizes the research which has gone into its construction, and presents a forecast of the UK housing market. Using the new housing model, we forecast a moderate recovery in the housing market in the later part of 1991 and 1992. This recovery is however short-lived and does not result in such high rates of house price increase as previous house price booms (Chart 1).
Cuts in interest rates following entry to the exchange rate mechanism of the EMS prompt a recovery in house prices from the middle of 1991. House price inflation then peaks with an increase in average UK house prices in 1992 of 11 per cent over the previous year. Increases in real personal disposable income are modest, by the standards of the 1980s, and for this reason the recovery does not develop the momentum of previous house price booms. House price inflation moderates again in 1993 falling back to around 7 per cent. Housing starts and housing investment recover only slightly from their present depressed levels.
the recovery in house prices is weaker than that foreseen in our April Forecast Release. This is because real personal disposable income is now forecast to grow more slowly during 1991. Sterling's membership of the ERM is followed by a fall in interest rates, but it is the timing of interest rate cuts rather than their magnitude which differs from the earlier forecast. The changed profile of interest rates has altered the house price forecast only marginally.