Speculative bubbles or market fundamentals? An investigation of US regional housing markets

This paper investigates the existence of speculative bubbles in the US national and 21 regional housing markets over three decades (1978–2015). A new method for real-time monitoring exuberance in housing markets is proposed. By taking changes in the macroeconomic conditions (such as interest rate, per-capita income, employment, and population growth) into consideration, the new method provides better control for housing market fundamentals and thereby it is expected to significantly reduce the chance of false positive identification. Compared with the method of Phillips et al. (2015a, 2015b), the new approach finds a dramatic reduction in the number of speculative housing markets and shorter bubble episodes in the US. It locates only one bubble episode in the early-to-mid 2000s over the whole sample period in the national housing market. At the regional level, it identifies two periods of speculation: late 1980s and early-to-mid 2000s. The early-to-mid 2000s bubble episode lasts longer and involves 16 metropolitan statistical areas.     

The impact of monetary policy on local housing markets: Do regulations matter?

This paper shows that monetary policy has uneven impacts on local housing markets, and that the magnitude of the impacts are correlated with housing supply regulations. We apply the linearized present value model, which allows the log rent–price ratio to be decomposed into the expected present values of all future real interests rates, real housing premia, and real rent growth, to the housing markets in 23 US metropolitan statistical areas. Based on the indirect inference bias-corrected VAR estimates, we find that MSAs that are more regulated have (i) a higher variance in the log rent–price ratio, (ii) a larger share of the variance explained by real interest rate, and (iii) a stronger impulse response of house price to the real interest rate shock.     

Are cyclical patterns of international housing markets interdependent?

This paper investigates the relationships among the US, UK, and Canadian housing markets from two aspects: the driving forces of housing cycles and the structures of correlation coefficients in different phases of housing cycles. The results indicate that the structures of driving forces and correlation coefficients are deeply hinged on the international housing markets. For the US and Canada pair, the driving forces of cyclical patterns are related to each other and the regime-switching correlation coefficients are always positive. However, for the US and UK pair and the UK and Canada pair, the driving forces are independent and there is no consistent pattern for the correlations.     

Can Chinese aid win the hearts and minds of Africa’s local population?

The vast increase in China’s aid projects has raised mounting concerns about the effectiveness of Chinese aid. To assess Chinese development assistance in Africa from the perspective of local residents’ attitude toward Chinese projects, we geographically match Chinese aid projects in Africa from 2000 to 2012 to the respondents of the Afrobarometer survey. By comparing the attitudes toward China reported by individuals who live close to ongoing Chinese projects at the time of the interview to those of individuals who live near sites where Chinese projects will be implemented in the future, this study establishes that the presence of Chinese projects induces a positive view of Chinese aid within the local population. Our mechanism analysis shows that people from all statuses can benefit from economic infrastructure projects, while the advantaged tend to have a better view of Chinese aid. In contrast, social infrastructure aid inspires a more positive view among disadvantaged people. We thus demonstrate that aid can have a differential impact on local attitudes, depending on aid types and statuses of recipients.     

The role of Chinese stock market in global stock markets: A safe haven or a hedge?

The contribution of the study is threefold. First, the paper proposes a new empirically testable definition for a safe haven and a hedge from the viewpoint of extreme and regular dependences measured by a modern statistical tool of copulas. Second, this paper investigates the extreme and regular dependences between the Chinese and the G7 stock markets, using a mixture copula specification, and the results reveal that the Chinese stock market has been not only a hedge but also a safe haven for the G7 stock markets all these years. Finally, this study suggests that the Chinese stock market is the target market for global stock fund managers and international investors, who are seeking a hedge or a safe haven for their portfolios, under turbulence.     

Wealth effects on the housing markets: Do market liquidity and market states matter?

This paper analyzes the effect of household wealth (including housing and financial wealth) on housing sales and probes their long-run and short-run dynamic relationships. We further examine the short-run effect of financial wealth on housing sales by employing quantile regressions, restricted upon different liquidity (quantile) levels and up-down housing markets, from which the differences between the early and late stages of an uptrend/downtrend can be respectively exhibited. We find that housing wealth, income, and mortgage rates have long-run influences on housing sales. Looking at the short run, we find that housing sales only respond to housing wealth and mortgage rates. When we distinguish the effects of financial wealth on housing sales in up-down housing markets, we note a positive influence of financial wealth on housing sales in down markets, but not in up markets. Particularly, our results show an impact of housing liquidity on the short-run relationships.     

Between centralized and decentralized welfare policy: Have national guidelines constrained the influence of local preferences?

Decentralized welfare services allow more flexibility toward individual needs assessment, but may also have negative consequences such as welfare competition or lack of equity between regions. Does national standardization require full centralization of individual assessment, or can a set of unbinding national guidelines reduce unwanted variation between regions? The case of this article is a national benefit norm for municipal social assistance payments issued by the Norwegian central government in 2001. A large share of municipalities changed their local norms to match the national norm in the following years, but data show that local benefit norms are uncorrelated with the actual payments. The apparent compliance to national guidelines does not translate into actual welfare generosity.Although caseworker discretion is important for individual payments, the municipal level of welfare payments is clearly influenced by local preferences and budget constraints. This implies that political control is active, but through other instruments than the local benefit norms.     

Political markets? Politics and economics in the emergence of markets for biodiversity offsets

This paper analyses the relationship between politics and performativity of economics in the emergence of markets for biodiversity offsets. While the role of economics in constructing markets has been demonstrated by sociology and social studies of science, it has also become apparent that politics plays an important role in the material outcome of economic experiments. Two case studies of the creation of markets for biodiversity offsets are analysed, in the United States and England. The findings suggest that the creation of both markets is rooted in the language, concepts and models of economics. Politics, on the other hand, functions as a mediator of the material expression of those models. Through this mediation effect, similar economic models are performed differently, resulting in a variety of markets. This suggests that the material outcomes of processes of market creation are not defined at the outset, but can be influenced by political processes.     

Are mortgage lenders guilty of the housing bubble? A UK perspective

Existing theoretical models of house prices and credit rely on continuous rationality of consumers, an assumption that has been frequently questioned in recent years. Meanwhile, empirical investigations of the relationship between prices and credit are often based on national-level data, which is then tested for structural breaks and asymmetric responses, usually with subsamples. Earlier author argues that local markets are structurally different from one another and so the coefficients of any estimated housing market model should vary from region to region. We investigate differences in the price–credit relationship for 12 regions of the UK. Markov-switching is introduced to capture asymmetric market behaviours and turning points. Results show that credit abundance had a large impact on house prices in Greater London and nearby regions alongside a strong positive feedback effect from past house price movements. This impact is even larger in Greater London and the South East of England when house prices are falling, which are the only instances where the credit effect is more prominent than the positive feedback effect. A strong positive feedback effect from past lending activity is also present in the loan dynamics. Furthermore, bubble probabilities extracted using a discrete Kalman filter neatly capture market turning points.     

Are housing prices improving GDP or vice versa? A cross-regional study of China

This study applies the bootstrap panel Granger causality test to examine the relationship between housing prices (HPs) and GDP across provinces in China. Empirical results show that HPs Granger cause GDP in the eastern region and in most provinces of the central region. Rapid industrialization and urbanization in the eastern region and the low-cost advantages of the central region promote housing investment and significantly affect GDP. However, GDP has no influence on HPs in the eastern region due to insufficient land supply, housing speculation and HPs deviating from the economic fundamentals. HPs do not Granger cause GDP in the western region because it is less attractive for housing investment. Also, GDP Granger causes HPs in the central and western regions that the economy can influence HPs. These findings could help the government formulate reasonable regional policies for the development of the housing market and economic growth.     

Great moderation or “Will o’ the Wisp”? A time–frequency decomposition of GDP for the US and UK

In this paper the relationship between the growth of real GDP components at different cycle lengths is explored in the frequency domain using discrete wavelet analysis. This analysis is done for both the US and the UK using quarterly data, and the results reveal interesting differences between the two countries. One of the key findings is that the “great moderation” shows up only at certain frequencies, and not in all components of real GDP. A second result is that the great moderation appears to have shifted cyclical power from shorter and business cycles to long cycles, which has important implications for both policy formulation and the probability of less frequent but more severe economic crises. We use these results to explain why the incidence of the great moderation has been so ephemeral across GDP components, countries and time periods. This also explains why it has been so hard to detect periods of moderation (or otherwise) reliably in the aggregate data.     

Is corruption in China “out of control”? A comparison with the US in historical perspective

This paper compares corruption in China over the past 15 years with corruption in the US between 1870 and 1930, periods that are roughly comparable in terms of real income per capita. Corruption indicators for both countries and both periods are constructed by tracking corruption news in prominent US newspapers. Several robustness checks confirm the reliability of the constructed corruption indices for both countries. The comparison indicates that corruption in the US in the early 1870s, when its real income per capita was about $2800 (in 2005 dollars), was 7–9 times higher than China’s corruption level in 1996, the corresponding year in terms of income per capita. By the time the US reached $7500 in 1928, approximately equivalent to China’s real income per capita in 2009, corruption was similar in both countries. The findings imply that, while corruption in China is an issue that merits attention, it is not at alarmingly high levels, compared to the US historical experience. In addition, the paper articulates a theoretical framework within which the relationship between corruption and economic development can be understood. The model is used to explain the “life-cycle” of corruption in the development process–rising at the early stages of development, and declining after modernization has taken place. Hence, as China continues its development process, corruption will likely decline.     

Segmentation of consumer markets in the US: What do intercity price differences tell us?

We quantify the magnitude of market segmentation in US consumer market and explore the underlying factors behind this segmentation, using a quarterly panel of retail prices for 45 products in 48 US cities from 1985 to 2009. The extent of market segmentation is estimated using city‐pair price differences within the framework of both linear autoregressive (AR) and nonlinear threshold autoregressive (TAR) models. We find that the magnitude of market segmentation varies from one product to another, but even more across city pairs in each product. Contrary to a widespread perception, market segmentation within the US is not necessarily larger for non‐tradable services compared to tradable goods. We identify potential drivers of market segmentation by relating the cross‐city and cross‐product variations of market segmentation to location‐specific and product‐specific characteristics—distance, relative city sizes, differences in wage and rent, type of product and proximity to marketplace. Distance, which captures more than transport costs, turns out to be the most salient factor even after controlling for a range of other potential factors. The effect of distance, however, varies substantially across products, with perishable products and locally produced products showing larger distance effect on market segmentation. We find that the magnitude of market segmentation has been somewhat stable during the sample period, but intercity price differences have become more sensitive to distance over time in many products under study.     

Does the use of multiple FTAs force firms to raise local input share?: Evidence of the spaghetti bowl phenomenon

This paper empirically investigates the firm-level relationship between the local input share and the number of used FTAs by employing the data on FTA utilization in Japanese affiliates in ASEAN. As a result, we do not find a robust linear relationship. However, affiliates using a large number of FTAs (seven or eight) have an extremely higher share of local inputs. This result might be interpreted as the first evidence of the “spaghetti bowl phenomenon”.     

Transmission of shocks across global real estate and equity markets: An examination of the 2007–2008 housing crisis

This study analyses the impact of the 2007–2008 U.S. financial crisis on the structure of interdependence among several major global real estate and equity markets. Moreover, it performs a step-by-step comparative analysis to evaluate similarities and differences in the convergence patterns of global real estate markets vis-à-vis global equity markets. Long-run results indicate that global real estate markets were less integrated than global equity markets prior to the crisis. Since the crisis, however, both global real estate and global equity markets have become highly integrated with the U.S. real estate and equity markets, respectively, and have fully converged. Short-run analyses indicate that during the pre-crisis period, global real estate markets were highly exogenous and independent. In contrast, global equity markets were comparatively more interdependent with one another and more endogenous. After the crisis, however, both global real estate and equity markets reacted strongly to shocks emanating from the U.S. markets, although the impact of the U.S. real estate market on the global real estate market is more pronounced than the effect of the U.S. equity market on the global equity markets. Finally, the study shows that U.S. real estate and equity markets are the channels of transmission or the sources of trends that drive global markets over the long-run and the short-run.     

How do Labor Unions Influence the Gender Earnings Gap? A Comparative Study of the US and Korea

Abstract

This paper provides a comparative study of the United States and Korea regarding the effects of unions on gender earnings gaps in 2004. Using datasets representative of the population of the US and Korea, this contribution shows that gender differences in the workers' observed characteristics and the unobserved component reduce gender earnings gaps in union jobs in both the US and Korea. Fringe benefits in the union sector attract women workers with higher labor market qualifications into the union sector and thereby reduce the gender earnings gap in this sector. The study finds that this self-selection process in the union sector is stronger in Korea than in the US, but the seniority-based wage system that prevails in the Korean union sector widens the gender earnings gap.     

Markups in the Euro area and the US over the period 1981–2004: a comparison of 50 sectors

This article provides estimates of price–marginal cost ratios or mark-ups for 50 sectors in eight Euro area countries and the US over the period 1981–2004. The estimates are obtained applying the methodology developed by Roger (J Polit Econ 103:316–330, 1995) on the EU KLEMS March 2007 database. Five stylized facts are derived. First, perfect competition can be rejected for almost all sectors in all countries; markup ratios are generally larger than 1. Second, average markups are heterogeneous across countries. Third, markups are heterogeneous across sectors, with services having higher markups on average than manufacturing. Fourth, services sectors generally have higher markups in the euro area than the US, whereas the pattern for manufacturing is the reverse. Fifth, there is no evidence that there is a broad range change in markups from the 1980s to the 1990s.     

Does the diversity of human capital increase GDP? A comparison of education systems

This paper examines how different education systems affect GDP by influencing the diversity of human capital. We construct an overlapping generation model in which agents are heterogeneous in income and innate ability, and the final goods are produced with differentiated intermediate goods. It is shown that under a realistic condition, the diversity of human capital induced by income inequality always lowers the GDP of the next period, while the diversity of human capital induced by heterogeneous ability can increase GDP, if the produced intermediate goods are sufficiently substitutable and firms have a large span of control. Hence, as public education equalizes education resources across households, it mitigates the negative effect of income inequality on GDP, while the effects of ability tracking crucially depend on the production structure of the economy.     

Islamic financial markets and global crises: Contagion or decoupling?

This paper investigates the contagion effects of the global financial crisis (GFC) and Eurozone sovereign debt crisis (ESDC) on Islamic equity and bond markets. Using a sample of Islamic stock indices from various developed and emerging markets and the global Islamic stock and bond (sukuk) indices, we explore asymmetric conditional correlation dynamics across stable and crisis periods and across the two crises. The results fail to provide strong contagion evidence between conventional and Islamic equity and bond indices, supporting the decoupling hypothesis of the Islamic securities. Our findings imply that Islamic equities and bonds may provide a cushion against risk and instability, particularly in periods of turmoil. The small number of contagion cases mostly relates to the ESDC and developed Islamic stock indices. The findings also show that the Islamic emerging stock indices in the BRICS provide the most effective international portfolio diversification benefits compared to the Islamic developed indices.     

How large is the local fiscal multiplier? Evidence from Chinese counties

The paper estimates local fiscal multipliers using annual data for 1800 China counties. The identification exploits a peculiar feature of the allocation mechanism of China's intergovernmental transfers that triggers exogenous variations on local public spending. When aggregate central-local transfers go up at the national level, National Poor Counties can receive a disproportionate amount of transfers. We therefore construct an instrument that captures this heterogeneity in the response of local public spending to national central-local transfers. The analysis points to local fiscal multipliers of approximately 0.6, which is much lower than the estimates in most previous studies. The effects of local public spending are concentrated on non-tradable industries. Finally, we find local public spending has striking effects on stimulating in-county investment, but has negligible effects on stimulating in-county consumption.