Bubbles in US regional house prices: evidence from house price–income ratios at the State level

We investigate the presence of bubbles in the US house price-income ratio at the State level by applying the recent time series-based econometric test to data from January 1975 to December 2014. We find evidence of bubbles in several States in the 1980s (i.e. California, Hawaii, Massachusetts, New York, etc.), which coincides with some existing studies that investigate housing bubbles or booms and busts using a range of alternative approaches. Our results show the existence of a housing bubble that originates in the early 2000s and collapses in the mid-2000s in more than 20 States and the District of Columbia concluding that the bubbles of the 2000s were more widespread than the 1980s, which is of special interest and importance. Our results seem to be in agreement with the talk given by Alan Greenspan in 2005, who suggest no sign of a nationwide housing bubble but a lot of local bubbles. We also study the importance of the regression model specification with/without an intercept and the regression model with an intercept could lead to false-positive identification of bubbles.     

Forecasting US consumer price index: does nonlinearity matter?

The objective of this article is to predict, both in sample and out of sample, the consumer price index (CPI) of the US economy based on monthly data covering the period of 1980:1–2013:12, using a variety of linear (random walk (RW), autoregressive (AR) and seasonal autoregressive integrated moving average (SARIMA)) and nonlinear (artificial neural network (ANN) and genetic programming (GP)) univariate models. Our results show that, while the SARIMA model is superior relative to other linear and nonlinear models, as it tends to produce smaller forecast errors; statistically, these forecasting gains are not significant relative to higher-order AR and nonlinear models, though simple benchmarks like the RW and AR(1) models are statistically outperformed. Overall, we show that in terms of forecasting the US CPI, accounting for nonlinearity does not necessarily provide us with any statistical gains.     

Regime switching and the (in)stability of the price–rent relationship: evidence from the US

Present value models of house prices assert that in the absence of self-fulfilling bubbles, a house price is equal to the present discount value of all future rents, which implies a linear relationship between house price and rent, and hence a stable price-to-rent ratio. Using a Markov switching error correction model, we re-examine this relationship in the US housing market and find two distinctive regimes: one with a long-run relation between house price and rent predicted by the present value models and the other in which the relation is nonlinear. Furthermore, we find evidence that deviations of house prices from the present value models’ predictions are caused by the overreaction of house prices to movements in rents rather than speculative bubbles attributable to extraneous factors.     

S-Curve at the industry level: evidence from US–UK commodity trade

Backus et al. in (Am Econ Rev 84(1): 84–103, 1994) found that the cross-correlation function between terms of trade and trade balance resembles the letter S and labeled it the S-curve. Support for S-curve is rather weak in some cases, most notably US when aggregate trade data are used. Empirical regularities based on aggregate trade data may suffer from a potential bias stemming from aggregation. Indeed, by employing US bilateral trade data excellent support for the S-curve is recovered. The support, however, was rather weak at the level of US–UK bilateral trade. Suspecting aggregation bias again, we employ US–UK trade data at the industry level and find overwhelming support for the S-curve. Furthermore, commodity attributes play no role. Valuable comments of an anonymous referee are greatly appreciated. Any error, however, is ours.     

Business regulation and business investment: evidence from US manufacturing 1970–2009

Regulation is often portrayed as placing a substantial burden on US businesses and the overall US economy. Moreover, policy options of “cutting red tape” and “reducing federal bureaucracy” are often asserted to be a way to stimulate investment and, through this channel, a way to promote economic growth. This paper examines the relationship between growth in regulatory restrictions in the Code of Federal Regulations and manufacturing investment in the United States over the 1970–2009 period. An industry-level dataset is constructed by mapping the novel industry-specific RegData dataset from the Mercatus Center at George Mason University to the comprehensive industry-specific manufacturing data in the NBER-CES Manufacturing Industry Database. In total, the constructed dataset includes 337 manufacturing industries. This approach yields substantial evidence that increased business regulation is associated with decreased business investment.     

Third-country exchange rate volatility and Japanese–US trade: evidence from industry-level data

As an important economic power globally as well as within Asia, Japan is susceptible to fluctuations in the yen versus both the dollar and its neighbours’ currencies. The resulting risk, from both sources, might, therefore, have important effects on Japanese trade. This study incorporates third-country exchange rate volatility (both yen-renminbi and dollar-renminbi) into a reduced form trade model for industry trade between the US and Japan. As was the case with a previous study that did not include these effects, our cointegration analysis finds that most industries are unaffected by risk. Third-country effects are, however, significant in a number of cases. Interestingly, a large share of US industries find that exports increase due to third-country risk, suggesting that this volatility is encouraging traders to reorient their trade markets by substitution.     

China’s house price: Affected by economic fundamentals or real estate policy?

Many theory and empirical literature conclude that house price can reflect economic fundamentals in the long-term. However, by using China’s panel data of 35 main cities stretching from 1998 to 2007, we find that there is no stable relationship between house price and economic fundamentals. House price has deviated upward from the economic fundamentals since government started macro-control of the real estate market. We consider that the mechanism between the house price and economic fundamentals is distorted by China’s real estate policy, especially its land policy. Meanwhile the policy itself is an important factor in explaining the changes of China’s house price. Then we estimate the dynamic panel data model on house price and the variables which are controlled by real estate policy. The result shows: land supply has negative effects on house price; financial mortgages for real estate have positive effects on house price; and the area of housing sold and the area of vacant housing, which reflects the supply and demand of the housing market, has negative effects on house price. We also find some differences in house price influence factor between eastern and mid-western cities. Finally, we propose policy suggestions according to the empirical results.     

Redistribution in the age of austerity: evidence from Europe 2006–2013

We examine the relationship between changes in a country’s public sector fiscal position on inequality at the top and bottom of the income distribution during the age of austerity from 2006 to 2013. We use a parametric Lorenz curve model and Gini-like indices of inequality as our measures to assess distributional changes. Based on Statistics of Income and Living Conditions (EU-SILC) and IMF data for 12 European countries, we find that more severe adjustments to the cyclically adjusted primary balance (i.e., more austerity) are associated with a more unequal distribution of income driven by rising inequality at the top. The data also weakly suggests a decrease in inequality at the bottom. The distributional impact of austerity measures reflects the reliance on regressive policies and likely produces increased incentives for rent-seeking while reducing incentives for workers to increase productivity.     

The relationship between population growth and standard-of-living growth over 1870–2013: evidence from a bootstrapped panel Granger causality test

This paper examines the linkages between population growth and standard-of-living growth in 21 countries over the period of 1870–2013. We apply the bootstrap panel causality test proposed by Kónya (Econ Model 23:978–992, 2006), which accounts for both dependency and heterogeneity across countries. We find one-way Granger causality running from population growth to standard-of-living growth for Finland, France, Portugal, and Sweden, one-way Granger causality running from standard-of-living growth to population growth for Canada, Germany, Japan, Norway and Switzerland, two-way causality for Austria and Italy, and no causal relationship for Belgium, Brazil, Denmark, Netherlands, New Zealand, Spain, Sri Lanka, the UK, the USA, and Uruguay. Dividing the sample into two subsamples due to a structural break yields different results over the two periods of 1871–1951 and 1952–2013. Our empirical results suggest important policy implications for these 21 countries as the directions of causality differ across countries and time period.     

Long-run money demand function in Argentina during 1935–1962: evidence from cointegration and error correction models

This paper provides a study of Argentina's money demand function during 1935–62 and 1946–62. These priods not only involved several important changes in Argentina's economy and banking system but also included high and volatile inflation. Using cointegration tests and error correction moderlling, results shows that even in periods of large variability there exists a stationary long-run demand function for real M1 and real M2 in Argentina. Error Correction models show that there is biddirectional causality between real money stock (M1 and M2) and the rate of inflation in both periods. Real income is found to be exogenous in all relationships. Thus results presented in this paper provide merit to Cagan's form of money demand function during high inflation periods.     

Volatility–volume co-movements: evidence from China metal markets

This article investigates the interactional relationship between price volatility and futures trading activity for three heavily traded metal products on the Shanghai Metal Exchange and the Shanghai Futures Exchange. Using models based on vector autoregression and generalized method of moments, we show, in particular, that futures trading activity has a strong impact on both spot and futures price volatility in copper and aluminium markets. Futures trading activity leads spot market volatility in copper and aluminium markets which suggests that futures markets have a destabilizing effect. In order to disentangle the effect of different traders’ types on asset price movements, we decompose futures trading into speculators’ and hedgers’ trading and investigate their contributions to volatility. As a robustness check, we investigate the impact of endogenous structural breaks on the interactional relationship between price volatility and futures trading.     

Persistence,mean reversion and non-linearities in the US housing prices over 1830–2013

The objective of this study is to provide a direct estimate of the degree of persistence of measures of nominal and real house prices for the US economy, covering the longest possible annual sample of data, namely 1830–2013. The estimation of the degree of persistence accommodates for non-linear (deterministic) trends using Chebyshev polynomials in time. In general, the results show a high degree of persistence in the series along with a component of non-linear behaviour. In general, if we assume uncorrelated errors, non-linearities are observed in both nominal and real prices, but this hypothesis is rejected in favour of linear models for the log-transformation of the data. However, if autocorrelated errors are permitted, non-linearities are observed in all cases, and mean reversion is found in the case of logged prices, though given the wide confidence intervals, the unit root null hypothesis cannot be rejected in these cases.     

The influence of co-morbidities on prescribing pharmacotherapy for insomnia: evidence from US national outpatient data 1995–2004

Summary

Objective: Patients with insomnia are likely to have other co-morbidities that could affect pharmacotherapeutic choices. This study examined the prevalence and impact of co-morbidities on the pharmacological treatment of insomnia.

Study design: A retrospective data analysis of the National Ambulatory Medical Care Survey from 1995 to 2004, comprising patients with a diagnosis of insomnia, was conducted. Multivariate logistic regression models were used to predict the impact of co-morbidities on pharmacotherapy for insomnia.

Results: A total of 5,487 unweighted patient visits with insomnia were identified, representing 161.4 million patients in the US. Approximately 38% of these patients had at least one co-morbid condition. Patients with mental co-morbidities, especially anxiety, had decreased likelihood of receiving pharmacotherapy for insomnia.

Conclusions: Mental co-morbidities such as episodic mood disorder, anxiety and depression are prevalent in patients with insomnia. However, many co-morbid patients do not receive pharmacological therapy specific for insomnia.     

A discrete-time hazard model of the adoption of legislative television: evidence from the US Congress, 1961–1986

The present study examines the probability of the adoption of legislative television over time (1961–1986) in the US Congress using a discrete-time hazard model. Against a theoretical construct where political services are modelled as search/experience goods, evidence is provided suggesting that constituent homogeneity, relative power struggles involving the legislative branches of Congress and the White House, and the potential prowess of legislators in Congress regarding skilful use of television are all important facets in this probability model. Use of alternative data sources and statistical techniques, such as those presented here, works to provide a greater foundation of knowledge regarding the relationship between representative democracy and modern means of communication.     

Export–led growth and structural change: evidence from Malaysia

Many studies have tried to establish the causal link between export expansion and economic growth. This contribution is to recognize that structural changes will change the sources of growth and this will affect the export-growth relationship. A country case study approach is used focusing on Malaysia, a country with one of the world's highest sustained growth rates and a long history of commodity trade. We use VAR analysis of Malaysian quarterly trade and GDP growth from 1965 to 1996. Trade data are disaggregated into primary and manufactures exports and causality tests are applied to the entire period as well as two subperiods #150 the 1965 #1501980 period when policy emphasis was on import substitution and the 1981#1501996 period when policies favoured export-led growth. Statistical tests confirm export-led growth for the full period and for the period to 1980 but tests on the 1981#1501996 period show growth causing exports. Primary exports had a stronger direct impact on economic growth than manufactures. The weakening support for export-led growth after Malaysia shifted to an export-oriented development strategy is associated with structural changes associated with industrialization. Interaction among trade and growth variables becomes more complex with a broadening export base and more diverse sources of growth.     

The behaviour of the US consumer price index 1913–2003: a study of seasonality in the monthly US CPI

This article analyses the seasonality in the monthly consumer price index (CPI) over the period January 1913 to December 2003. We examine three types of month effects: if the mean of monthly CPI changes of the entire data set, and of a given month were significantly different from zero; if the mean of monthly CPI changes of a given month was different from the mean of the other months; and if the variance of the monthly CPI changes for a given month was different from the variance of the other months. The mean of monthly CPI changes for the entire data set (0.27%) was found to be significantly greater than zero. The means of monthly changes show a downward trend from September to December. When the data are sliced into three sub-periods, we find an increasing trend in the means and medians of monthly changes but a decreasing trend in the SDs of the monthly changes. The mean of monthly CPI changes during the republican presidencies (0.15%) was significantly lower than during the democratic presidencies (0.38%).     

Price–value deviations: further evidence from input–output data of Japan

This paper subjects to empirical testing the labour theory of value using input–output data from the economy of Japan for the years 1970, 1975, 1980, 1985 and 1990. The results of the analysis show that labour values and prices of production are extremely good approximations to market prices. In fact, the proximity of prices of production to market prices is closer than that of labour values, a result which suggests that prices of production constitute more concrete centres of gravitation for market prices. Furthermore, we find that prices of production change as a result of variations in income distribution more often than not in a monotonic way and that in fewer cases they display curvatures, which may even reverse the order between prices of production and values.     

Easy grading practices and supply–demand factors: evidence from Italy

In this article, we investigate how heterogeneity in grading standards across university degree courses is related to supply and demand factors. Using a sample of almost 26,000 students enrolled at an Italian University, we document how grades vary significantly across degrees. After controlling for student characteristics, class-size, classmate quality and degree fixed effects, it emerges that students obtain better grades and are less likely to drop-out when their degree course experiences an excess of supply. We adopt an instrumental variable strategy to account for endogeneity problems and instrument the excess of supply using the total number of universities offering each degree course. Our two-stage least squares (TSLS) estimates confirm that the teaching staff on degree courses facing low demand tend to set lower academic standards with the result that their students obtain better grades and have a lower probability of dropping out than they might otherwise. Similar results are obtained using a control function approach.     

The tax–spending nexus: evidence from Romania using wavelet analysis

This article investigates the relationship between government revenue and expenditure in Romania between 1991 and 2015 using the wavelet approach. The article presents detailed information for different sub-periods and frequencies, emphasising the lead–lag nexus between variables under cyclical and anti-cyclical shocks. The main findings show that using individual taxation techniques under structural reforms should control short-term budget deficits. Separately, when an economic crisis arises, expenditure adjustment is a more appropriate fiscal instrument. In the medium and long term, the taxation system for individuals is recommended to be used to control for budgetary deficits during crisis. At the same time, in the medium term, government expenditures also represent a suitable policy choice.     

LDC stabilization policies,price and output adjustment: theory and evidence, 1974–83

This paper introduces a method for the analysis of regional differences in the utilization of labour resources. The method developed is a version of ‘components-of-change’ analysis in which labour force utilization in each regional labour market is compared with the sitation of a labour market with the highest level of utilization. The aggregate measure is split up into three components: open (registered) unemployment, hidden unemployment and underemployment. The effects of structural factors on aggregate differences are also estimated. In the empirical section the situation of Finnish provinces in 1989 is analysed within the framework developed. The results indicated the existence of large regional differences in the utilization of labour resources.