Housing Activity and Consumer Spending

The current expansion has seen record-high levels of transactions in housing, extraordinary growth in the aggregate value of owner-occupied housing, and large increases in the amount of funds realized from the refinancing of mortgage debt. Many analysts thus have pointed to the strong housing market and rising home prices as a major pillar supporting recent economic growth and have expressed concern that a contraction in housing activity and values could pose a significant risk to consumer spending and real economic growth. This paper explores the channels by which the housing market may affect consumer spending and assesses the potential risk from a softening in the housing market. Our assessment is that while a housing slowdown by itself may slow consumer spending some, it is probably insufficient to precipitate a downturn without some additional shocks outside of the sector. JEL Classification E21,R21     

对《财务管理》内部转移价格的再认识

集团化下的大企业，各个责任主体分权管理，责任核算。相互之间提供劳务或转换产品以及责任结转时，为了明确各责任中心的责与权，不可避免要引入内部转移价格。在制定内部转移价格时，应明确有关内部转移价格制定的原则。诸如：为何要有内部转移价格、内部转移价格制定方法以及内部转移结算方式等问题。     

How sensitive are consumer expenditures to retail energy prices?

There is growing evidence that the primary effect of energy price shocks on the U.S. economy involves a reduction in consumer spending. We quantify the direct effect on real consumption of unanticipated changes in discretionary income, shifts in precautionary savings, and changes in the operating cost of energy-using durables. The possibility of asymmetries in the response of real consumption to energy price shocks is also considered. We demonstrate that linear models are consistent with the symmetric behavior of real consumption in 1979 (when energy prices increased sharply) and in 1986 (when they fell sharply). It is shown that historically energy price shocks have been an important factor in explaining U.S. real consumption growth, but by no means the dominant factor.     

The relationship between agricultural commodity prices,crude oil prices and US dollar exchange rates: a panel VAR approach and causality analysis

This study examines the relationship between crude oil prices, US dollar exchange rates and 30 selected international agricultural prices and five international fertilizer prices in a panel framework. The study uses panel VAR methods and Granger causality tests on panel data sets of agricultural commodity prices (as well as specific agricultural commodity sub-groups) and fertilizer prices with monthly observations of the period from June 1983 to June 2013. The empirical results of the present study indicate that crude oil prices as well as US dollar exchange rates affect international agricultural commodity and fertilizer prices. Furthermore, contrary to the findings of several studies in the literature, the present study supports bidirectional panel causality effects between crude oil prices and international agricultural prices as well as between US exchange rates and international agricultural prices.     

The relationship between stock prices and exchange rates in South Africa and Nigeria: structural breaks analysis

The relationship between stock prices and exchange rates has continued to generate interest from both the academia and financial industry players for many years. This study conducts an empirical investigation into the relationship between stock prices and exchange rates for the two largest economies in Sub-Saharan Africa – South Africa and Nigeria. Our methodology accounts for structural breaks in the data and the long-run relationship between stock and foreign exchange markets. The results of multivariate causality tests with structural breaks showed that causality runs from exchange rates to domestic stock prices in Nigeria (flow channel) while in South Africa, no causality exists between domestic stock prices and exchange rates. The results also reveal that there is causality from the London stock market to both countries’ stock markets, thus showing that international stock markets are driving both the Nigerian and South African stock markets.     

Explaining House Price Dynamics: Isolating the Role of Nonfundamentals

This paper examines the role of nonfundamentals‐based sentiment in house price dynamics, including the well‐documented volatility and persistence of house prices during booms and busts. To measure and isolate sentiment's effect, we employ survey‐based indicators that proxy for the sentiment of three major agents in housing markets: home buyers (demand side), home builders (supply side), and lenders (credit suppliers). After orthogonalizing each sentiment measure against a broad set of fundamental variables, we find strong and consistent evidence that the changing sentiment of all three sets of market participants predicts house price appreciation in subsequent quarters, above and beyond the impact of changes in lagged price changes, fundamentals, and market liquidity. More specifically, a one‐standard‐deviation shock to market sentiment is associated with a 32–57 basis point increase in real house price appreciation over the next two quarters. These price effects are large relative to the average real price appreciation of 71 basis points per quarter observed over the full sample period. Moreover, housing market sentiment and its effect on real house prices is highly persistent. The results also reveal that the dynamic relation between sentiment and house prices can create feedback effects that contribute to the persistence typically observed in house price movements during boom and bust cycles.     

Price Stability in Economies with Habit Persistence

This paper shows that the divine‐coincidence does not hold in a sticky price model with external habit if a time‐varying tax rate on labor income is not implemented to fully eliminate the time‐varying distortions associated with external habit and monopoly power in goods market. The required labor income tax rate is inversely related to the risk‐free real interest rate and the markup in the goods market, but it is proportional to the degree of external habit. Under this circumstance, the optimal monetary policy commands a countercyclical interest rate, having a perfect negative correlation with tax rate in the sticky price model with external habit. If a time‐invariant tax is the only fiscal instrument, then the degree of external habit entails a gap between the private marginal rate of substitution between consumption and labor and the social marginal rate of substitution, generating an endogenous trade‐off between the stabilization of welfare‐relevant output gap and inflation. Under this circumstance, price stability is not the optimal policy. The monetary policy authority should optimally try to undo the time‐varying distortions associated with external habit and monopoly power in goods market by deviating from price stability.     

More Facts about Prices: France Before and During the Great Recession

Using microprice data, we document new facts on price rigidity in France: (i) each month 20.1% of prices are changed, which compares to 24.1% in the United States—excluding sales, however, the fraction of prices modified each month is about the same in France and in the United States (around 17%); (ii) the distribution of price changes is quite dispersed; (iii) the frequencies of price increases and decreases contribute a lot to inflation variations, and price increases are more frequent in January (even when sales are excluded); (iv) sales contribute significantly to the volatility of inflation but play a minor role in the transmission of macroeconomic fluctuations to prices; and (v) during the Great Recession patterns of price adjustment were only slightly modified.     

Into the Mussa puzzle: monetary policy regimes and the real exchange rate in a small open economy

Industrial countries moving from fixed to floating exchange rate regimes experience dramatic rises in the variability of the real exchange rate. This evidence, forcefully documented by Mussa [Nominal exchange regimes and the behavior of real exchange rates: evidence and implications. Carnegie-Rochester Conference Series on Public Policy 25 (1986) 117], is a puzzle because it is hard to reconcile with the assumption of flexible prices. This paper lays out a dynamic general equilibrium model of a small open economy that combines nominal price rigidity with a systematic behavior of monetary policy able to approximate a continuum of exchange rate regimes. A version of the model with complete exchange rate pass-through is broadly consistent with Mussa’s findings. Most importantly, this holds independently of the underlying source of fluctuations in the economy, stressing the role of the nominal exchange rate regime per se in affecting the variability of the real exchange rate. However, only a model featuring incomplete exchange rate pass-through can account for a broader range of exchange rate statistics. Finally there exist ranges of values for either the degree of openness or the elasticity of substitution between domestic and foreign goods for which the baseline model is also consistent with the empirical insensitivity of output volatility to the type of exchange rate regime, as documented by Baxter and Stockman [Journal of Monetary Economics 23 (1989) 377].