Optimal stabilization policies for housing activity

The usual approach in econometric modeling is to assume that the behavior of government agencies is exogenous. In this paper we have suggested that the policies of government agencies are not truly exogenous and should be studied in relation to the specific objectives pursued by these agencies.Within this framework, we investigated the implications of optimizing the behavior of two U.S. government agencies, Federal Home Loan Bank (FHLB) and Federal National Mortgage Association (FNMA), involved in the housing market. The technique we have utilized is dynamic programming.Based on the assumption that there agencies attempt to stabilize the housing market we have calculated the values for the optimal strategies in the past years and compared them with the historical patterns they have actually followed. Our interpretation of the behavior of these agencies is as follows: FHLB has a significant potential for housing stabilization. However, it has historically put more emphasis on keeping a uniform policy than stabilizing the housing activity. In this way, the role it has played in the housing market may be more destabilizing than stabilizing. On the other hand, FNMA's activity has had a rather uncertain effect on the housing stabilization. The conservative policies that FNMA has followed in the past are consistent with the uncertainties implicit in decision making but, at the same time, can be blamed for failing to create sufficient information regarding their effectiveness on the housing stabilization.     

The experience of the EEC Eurolink Project in modeling bilateral trade linkage equations

Following the basic philosophical approach of the LINK Project, which links various national econometric models built in different countries, the Commission of the European Communities has succeeded in linking the full-size quarterly econometric models of the four major European countries. The Eurolink Project is being extended to cover the other EEC countries as well as the United States, Canada, and Japan. The results reported in this paper are part of this larger project which attempts to link the EEC member economies in a trade and capital flows econometric model and explain the transmission of interdependent economic fluctuations from country to country. In the present study, the interconnection between the various economies is represented by bilateral trade flows only. Flows of invisibles and of financial capital are not completely studied and are not yet ready to be included in this report.The theoretical structural model with its bilateral trade supply and demand functions and the technique employed for the construction of bilateral import and export price indices are presented. Estimation results are shown and discussed with emphasis on their use for the analysis of international trade and for policy decision making.     

Numerical simulation as a complement to econometric research on workplace safety

Using a computable hedonic equilibrium model of the labor market, we numerically simulate the interactions between workers and firms as tempered by the state and federal regulations intended to influence workplace safety. We compute the changes needed for OSHA to become economically meaningful and determine the impact on safety from further expanding the experience rating of workers' compensation insurance premiums. Most importantly, we show how numerical simulation can serve as a complementary research tool to econometric models. Simulation is well suited for studying extreme policy changes and locating structural conditions pivotal in determining economic outcomes.     

Financial inclusion in India: An axiomatic approach

In this paper we first develop an axiomatic measure of financial inclusion. This measure is readily implementable and useful to determine policy priorities to promote financial inclusion. Next, we demonstrate that supply side data on banking services can be usefully employed to measure financial inclusion. Third, we examine the effects of major banking policies on financial inclusion across states in India during 1972–2009, using panel data econometrics techniques. We find that the social-banking policy has played crucial role to foster financial inclusion across states in India during 1977–1990. Thereafter, the move toward pro-market financial sector reform has adversely affected the pace of financial inclusion. This paper identifies geographic penetration of banks and credit availability as two policy targets to foster financial inclusion in India.     

Policy modeling of foreign exchange rates

This paper is neither a complete survey of empirical work on exchange rate determination, nor a review of the ballooning volume of theoretical models. It is instead an attempt to classify the main alternative approaches to modeling exchange rates. I shall concentrate on approaches that can be used to assess the effects of alternative policies. There will be four further sections in the paper. The first three sections will each deal withthe structure, empirical support, and policy consequences of three main types of model: purchasing power parity models emphasizing the close and immediate relation of goods markets; interest rate parity models emphasizing the close and immediate international linkage of markets for financial assets; and structural balance-of-payments models that do not assume either of the above linkages to be so strong and immediate as to eliminate the other, and that hence require separate (but interdependent) modeling of trade and capital linkages in the determination of exchange rates. Each of these main categories has many rather distinct models within it, and some models are not easily classified into one of the three categories; I hope that the three-way split will nevertheless serve to make some distinctions that are important for policy modeling.In the final section I shall try to summarize the available model results that pertain to national and international policy choices under a system of more flexible exchange rates, and then to suggest where more or better model building might usefully increase the amount of information available to guide policy decisions.     

Interest rate policies and inflation in interdependent economies: Recent policy dilemmas

This paper examines Federal Reserve Board policies that are premised on a negative short-run association of interest rate movements and the rate of inflation. In particular, econometric evidence is provided, supporting the view that tighter monetary policy appears to raise inflation rates in the short run. Conversely, it is demonstrated that easier monetary policy does not necessarily raise inflation rates in the short run. In the case of uncoordinated monetary restrictiveness, interest rate competition among major countries can produce higher inflation and lower growth than was originally intended.     

The impact of the Soviet Union upon the U.S. feed/livestock sector— An assessment

In this article, the impact of volatile Soviet Union corn imports on the U.S. feed/livestock sector is analyzed using an econometric model. The model's attention to supply response when feed price changes enables it to determine the nature of the effect of exogenous shocks across feed and livestock sectors. The model is used in historical simulation to demonstrate the effects of actual and alternative paths of variable Soviet import demand and to explore the difficulties of deriving a stabilizatior policy for these linked sectors.     

A model of the Canadian global exchange rate: A test of the 1970s

This comment points out some methodological weaknesses in the Canadian global exchange rate model and the associated efficiency tests of Marwah and Bodkin. The model is found to be inadequate for policy analysis.     

A model for the coordination of recovery policies in the OECD region

The paper presents a world econometric model of the LINK type, which is then applied to the study of the recovery prospects of the OECD economies. Specifically, several policy packages coordinated at the international level are assessed for the period 1978–1980.The model includes country specific macroeconomic structures for eight developed economies, and different type structures for five additional developing countries. The obvious policy and behavioral differences that exist between these two groups of countries are highlighted through the specification, in one case, of demand-oriented Keynessian models able to capture short-term cyclical phenomena. The supply orientation with several resource gaps (savings, foreign exchange, etc.) prevails for the developing economies. The two sections after the introduction review broadly the main modeling features of the project, including the international comparison of structural parameters. In the following sections several policy experiments are attempted. The underlying behavioral assumptions stress the community of interest that prevails among OECD economies. These experiments consider the case of stimulative policies adopted in (1) the United States alone, (2) three engine countries (United States, Federal Republic of Germany, and Japan), and (3) several developed countries that are part of the OECD system. Other experiments assume additional policy packages to correct present current account imbalances. The general conclusion of the study is that the prospects for economic recovery in the OECD area depend to a crucial extent on the ability of the member countries to agree on policies able to make the major economic indicators of each economy converge toward levels that are domestically manageable and mutually supporting.     

The impact of government spending on Ireland’s housing and residential market – Targeted vs economy-wide stimulus

The Irish residential property market is currently characterized by a considerable structural deficiency in housing supply compared to the underlying level of demand. The lack of housing has led to several economic and social problems in Ireland. The imbalance between supply and demand has led to both house prices and rents increasing faster than household incomes. Recent policy initiatives by the Irish Government have outlined plans for significant spending aimed at increasing the numbers of housing completions to tackle these issues. This paper examines the impact of government spending on housing supply using a structural econometric model of the Irish economy with a specific construction block. Within our econometric analysis, we compare the results of an economy wide versus a sector specific government stimulus on the property market. Our simulations suggest that, in order to achieve social and economic goals like increasing the number of dwellings and making housing more affordable by containing house price inflation, a targeted policy such as that described in the Irish Government's Housing for All plan may be preferable to an economy-wide stimulus.     

Crime,deterrence and unemployment in Greece: A panel data approach

This study empirically examines the relationship among crime, deterrence and unemployment in Greece. A regional dataset over the period 1991–1998 was collected and analysed. Our econometric methodology follows the Generalized Method of Moments (GMM) estimator applied to dynamic models of panel data. The results show that property crimes are significantly deterred by higher clear-up rates and that unemployment increases crime. For violent crimes, however, the effect of the clear-up rate and unemployment are found to be generally insignificant. Finally, our results may provide support to policy makers in forecasting criminal activity in the current economic downturn under a wave of harsh austerity measures, budget cuts and increased unemployment.     

Did monetary policy fuel the housing bubble? An application to Ireland

This paper provides empirical evidence of the role of the euro in the genesis of the recent Irish financial-economic crisis. By using a Taylor rule we measure the appropriateness of the ECB’s one-size-fits-all policy rate for the Irish economy. A counterfactual analysis suggests that the Irish interest rate should have been on average 6.5% higher. Using a BVAR and multivariate housing model, we provide econometric evidence that under an alternative sovereign monetary policy, the average house price would have been 25–30% lower just before the housing bust. In addition, it shows that a monetary policy tailored to the needs of the member state prevents housing prices from dramatically increasing.     

The Evolution of Penal Policy in Canada

This paper reviews the evolution of penal policy in Canada in recent years. In many respects, Canada occupies a unique position with respect to criminal justice. The principal influence on penal policy development has been the United States, yet at the same time developments in the United Kingdom have also been important. One result is that policy development in recent years has tended to follow a middle path between the more extreme and radical American route (that has given rise to policies such as "three strikes" legislation) and the more conservative European reforms. Canada's policies with respect to punishment have been affected by a number of influences, including: the presence of advocacy groups; the reporting by the news media of high-profile tragedies such as the Montreal massacre of fourteen young women; the restrictions of budgetary constraints; and the intervention of several federal elections in which crime became an important electoral issue. In this respect, penal policy development in Canada echoes trends in other jurisdictions. The federal government, which is responsible for policy development (but not the administration of those policies) has attempted to pursue a dual-track policy. One branch of this policy has sought to reduce the use of imprisonment and thereby cut criminal justice expenditures. The other track has sought to placate public and political pressure on the government by introducing more repressive penal policies, including severe minimum penalties and higher maximum penalties for young offenders. This paper reviews recent developments in the critical areas of sentencing and parole, and draws some general conclusions about criminal justice policy development in this country.     

Evaluating the injury risk associated with All-Terrain Vehicles: An application of Bayes' rule

This article discusses several technical and conceptual issues relating to the regulation of All-Terrain Vehicles (ATVs). Qualitative response models are used to analyze a survey of injured persons and a survey of the general population of users. Because the latter did not distinguish injured and noninjured persons, an application of Bayes' rule is used to make inferences about the relationship between the two injury categories, and to consistently estimate injury risk. The article concludes with a discussion of the problem of risk awareness and some policy implications.This article is based on work done while Professor Rubinfeld was a consultant to the Consumer Product Safety Commission. The authors wish to thank the CPSC for its support, Steven Shavell for his encouragement, and Paul Ruud for his econometric advice and assistance. The opinions expressed in this article are those of the authors and not of the CPSC.     

Indexation of international commodity prices through international buffer stock operations

The developing economies have been advocating the indexation of the prices for their primary commodity exports by tying such prices to other relevant international prices, such as the prices of imports to the less-developed countries. We have used econometric models to simulate a program of indexation of the prices of the ten UNCTAD core commodities at their 1963 levels for 1963–1975. The results suggest definite difficulties in such a program. Most notably the order of magnitude of the costs of buffer stock operations and financing is likely to be prohibitive. Also the distribution of benefits and losses among the less-developed countries is quite arbitrary. Therefore we are very skeptical about indexation by buffer stock operations.     

Spillover effects of taxes on government debt: a spatial panel approach

It is claimed that tax policy is neither time- nor space-independent due to cross-border tax base mobility, which induces spillovers. Specifically, fiscal shocks in one country are supposed to have an impact on fiscal policies in other countries. Different types of taxes influence economies differently. This paper addresses the question of their impact on government debt. Within a framework of spatial econometric modeling, we evaluate the impact of capital, labor and consumption taxes on public debt in 34 European countries in 2002–2011, and find strong spatial spillovers. We show that a consumption tax and, to a lesser degree, a capital tax significantly affect the sovereign debt, and that the global relations play a leading role (i.e. dominate the local ones) in shaping fiscal policy.     

The impact of the term spread in US monetary policy from 1870 to 2013

In this paper, we apply a novel econometric approach joint with an exhaustive revision of the main events in the history of US monetary policy in order to check the effectiveness of monetary policy focused on interest rates. Unlike the traditional cointegration approach, this new methodology allows us to break with the rigidity of traditional approaches in favour of letting the series be cointegrated, and the spread is able to follow a long-memory process; i.e., it does not necessarily need to be I(0) and also rejects the assumption that interest rates could follow the dichotomy I(0)/I(1). To the best of our knowledge, this is one of the first applications of the Fractionally Cointegrated Vector Autoregressive (FCVAR) model (Johansen and Nielsen (2012) and Nielsen and Popiel (2016)). Aiming to achieve this goal, we use two databases, i.e., the Jordà-Schularick-Taylor Macrohistory Database and Shiller’s database. Our results cannot reject the Expectations Hypothesis of Term Structure in this time period, and more importantly, we also find that the long-term rate drives the long-run relationship, contributing to the total proportion to the common trend; the persistence of the spread shows us effective control power over interest rates by the Fed.     

I am more than a mom: Stories of parental leave during the transition to motherhood in Canada

The transition to motherhood is a time of tremendous change, during which maternal subjects experience important shifts in their relationships with family, friends, employers, and state. Parental leave policies have potential to mitigate some of these changes, contributing positively to health and economic outcomes. Indeed, such policies have been identified as essential for achieving gender equality, serving to address both recognition and redistributive claims. In this paper, we explore parental leave policy through the lens of first time mothers in Canada, where two distinct policy regimes coexist. Using narrative analysis, we examine the ways in which the transition to motherhood is embodied and enacted through policy experiences. The stories we uncover, stories of helplessness, of control and resistance, and of stymied progress, illuminate how leave policies differently position maternal subjects in complex social settings.     

The econometric modelling of social preferences

Experimental data on social preferences present a number of features that need to be incorporated in econometric modelling. We explore a variety of econometric modelling approaches to the analysis of such data. The approaches under consideration are: the Random Utility approach (in which it is assumed that each possible action yields a utility with a deterministic and a stochastic component, and that the individual selects the action yielding the highest utility); the Random Behavioural approach (which assumes that the individual computes the maximum of a deterministic utility function, and that computational error causes their observed behaviour to depart stochastically from this optimum); and the Random Preference approach (in which all variation in behaviour is attributed to stochastic variation in the parameters of the deterministic component of utility). These approaches are applied in various ways to an experiment on fairness conducted by Cappelen et al. (Am Econ Rev 97(3):818–827, 2007). Various models that we estimate succeed in capturing the key features of the dataset. Conclusions concerning fairness-related behaviour depend crucially on the choice of econometric model.     

The political economy of U.S. economic performance: is the president responsible?

A recurring theme in electoral politics is that American voters hold the president responsible for the state of the economy. Ironically, many Presidency scholars argue that presidents are ill equipped to manage the economy because other variables compete with and complicate the effects of fiscal policy. These include international variables, private market forces, and monetary policy, among others. Using simultaneous equation methods, we examine the direct and indirect effects of fiscal policy on economic performance while controlling for a variety of other determinants of economic performance. We find that fiscal policy plays a significant role in influencing unemployment and economic growth in the United States, even after controlling for a variety of other determinants of economic performance. We close by discussing the importance of linking the econometric modeling literature with the literature on presidential management of the economy.