When to Lean against the Wind

In this paper, we show that policymakers can distinguish between good and bad credit booms with high accuracy and they can do so in real time. Evidence from 17 countries over nearly 150 years of modern financial history shows that credit booms that are accompanied by house price booms and a rising loan‐to‐deposit ratio are much more likely to end in a systemic banking crisis than other credit booms. We evaluate the predictive accuracy for different classification models and show that characteristics observed in real time contain valuable information for sorting the data into good and bad booms.     

Material progress and the challenge of affluence in seventeenth-century England

In the later seventeenth century, material progress was first identified in England as a recent achievement with boundless future promise, and it was welcomed despite fears about the threats that it was perceived to present to national and personal well-being. The article investigates the roots of that confidence, and finds them in political economy and other intellectual developments that shaped interpretations of changing standards of living. The civic and moral 'challenge of affluence' was fully recognized but never resolved. Progress was accepted, and had to be defended in war-time, as the route to general happiness, 'ease', and plenty.     

A Note on Factors Influencing the Utilization of Bankcard*

This note is an empirical examination of the nature of factors influencing the utilization of credit cards in Australia. Cross-section data from a 1980 survey are employed in an attempt to determine what individual characteristics increase the probabilities of holding cards and using extended credit facilities. Aggregative time-series analysis seeks to explain the trends in Bankcard financing of various types of expenditure.     

Optimal Policy under Uncertainty and Learning about Climate Change: A Stochastic Dominance Approach

Global climate change presents a classic problem of decision making under uncertainty with learning. We provide stochastic dominance theorems that provide new insights into when abatement and investment into low carbon technology should increase in risk. We show that R&D into low-carbon technologies and near-term abatement are in some sense opposites in terms of risk. Abatement provides insurance against the possibility of major catastrophes; R&D provides insurance against the possibility that climate change is marginally worse than average. We extend our results to the comparative statics of learning.     

House Price Markups and Mortgage Defaults

The transaction price of identical housing units can vary widely due to heterogeneity in buyer and seller preferences, matching, and search costs, generating what we term “markups” above or below the average market price. We measure markups for 3.4 million purchase-money mortgages and show that they can predict mortgage defaults and credit losses conditional on default even after accounting for collateral coverage (loan-to-value ratio) and a comprehensive set of other covariates. The findings suggest that standard collateral coverage estimation may be inaccurate, with implications for both individual and portfolio-level credit risk assessment.