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Do Wide-Reaching Reform Programmes Foster Growth?

A new Bruegel post estimates “the impact of large reform waves implemented in the past 40 years worldwide, [and shows] that reforms had a negative but statistically insignificant impact in the short term. […] Reforming countries, however, experienced significant growth acceleration in the medium-term. As a result, 10 years after the reform wave started, GDP per capita was roughly six percentage points higher than the synthetic counterfactual scenario.”

Figure 2. Statistical analysis on the difference between the two

Source: Marrazzo and Terzi (2017)

On the heterogeneity of reform impact, “The overall positive effect of reforms is confirmed in both instances (Table 1). However, advanced economies seem to have reaped fewer benefits from their extensive reform programmes than emerging markets. Moreover, the time-profiling of the pay-offs seems somewhat different; while countries closer to the technological frontier, and probably with better institutions, see benefits from reforms in the first five years, these materialise only in the longer run for emerging markets.”

Table 1. Average impact of reforms on yearly per capita GDP growth rate vis-à-vis counterfactual

Note: Bold indicates significance at the 5% level

Source: Marrazzo and Terzi (2017)

These findings are consistent with those in my forthcoming paper with Bibek Adhikari, Romain Duval, and Bingjie Hu. We use Synthetic Control Method (SCM) and implement six case studies of well-known waves of reforms, those of New Zealand, Australia, Denmark, Ireland and Netherlands in the 1990s, and the labor market reforms in Germany in the early 2000s. Our results suggest a positive but heterogenous effect of reform waves on GDP per capita.
Source: Adhikari, Duval, Hu, and Loungani (2018)

The Bruegel post is available here. Our paper is available here. For those who do not have access, the working paper version is available here.

A new Bruegel post estimates “the impact of large reform waves implemented in the past 40 years worldwide, [and shows] that reforms had a negative but statistically insignificant impact in the short term. […] Reforming countries, however, experienced significant growth acceleration in the medium-term. As a result, 10 years after the reform wave started, GDP per capita was roughly six percentage points higher than the synthetic counterfactual scenario.”

Figure 2. Statistical analysis on the difference between the two

Source: Marrazzo and Terzi (2017)

On the heterogeneity of reform impact,

Read the full article…

Posted by at 11:34 AM

Labels: Inclusive Growth

Housing View – April 13, 2018

On cross-country:

  • For Home Prices in London, Check the Tokyo Listings – IMF
  • Global Investors, House Price Dispersion, and Synchronicity – IMF
  • Housing as a Financial Asset – IMF
  • The Global Housing Crisis – The Atlantic
  • Global Residential Cities Index – Q4 2017 – Knight Frank

 

On the US:

 

 

Photo by Aliis Sinisalu

On cross-country:

  • For Home Prices in London, Check the Tokyo Listings – IMF
  • Global Investors, House Price Dispersion, and Synchronicity – IMF
  • Housing as a Financial Asset – IMF
  • The Global Housing Crisis – The Atlantic
  • Global Residential Cities Index – Q4 2017 – Knight Frank

 

On the US:

Read the full article…

Posted by at 5:00 AM

Labels: Global Housing Watch

Housing as a Financial Asset

From IMF’s Global Financial Stability Report – April 2018:

“Housing is an important asset class for households and investors. In a typical economy, housing wealth, on average, accounts for roughly one-half of total national wealth and can fluctuate considerably over time (Piketty 2014). Real estate investors often borrow to purchase housing assets, making mortgage payments and receiving rental income and potential capital gains. Publicly traded real estate investment trusts have become available in many countries, allowing investors to invest indirectly in the real estate market. In addition, institutional investors have been increasing their direct exposure to residential real estate in recent years (see Figure 3.3 in the main text).

Investing in housing assets can yield considerable returns in the long term, but is subject to significant variation over time. In many advanced economies, the average annual real return on housing assets between 1950 and 2015 lies between 5 percent and 8 percent,comparable in magnitude to that of equity investment but with a lower standard deviation (Jordà and others 2017). In the shorter term, however, the expected returns on housing assets can vary significantly over time and are affected by the risk appetite of financial market investors as well as other behavioral factors (for example, Cheng, Raina, and Xiong 2014; Brunnermeier and Julliard 2008).”

F2

Continue reading here.

From IMF’s Global Financial Stability Report – April 2018:

“Housing is an important asset class for households and investors. In a typical economy, housing wealth, on average, accounts for roughly one-half of total national wealth and can fluctuate considerably over time (Piketty 2014). Real estate investors often borrow to purchase housing assets, making mortgage payments and receiving rental income and potential capital gains. Publicly traded real estate investment trusts have become available in many countries,

Read the full article…

Posted by at 10:33 AM

Labels: Global Housing Watch

Global Investors, House Price Dispersion, and Synchronicity

From IMF’s Global Financial Stability Report – April 2018:

“House price dispersion can be used as a proxy for demand from high-net-worth foreign investors with a preference for luxury housing. Using granular data from the US housing market, this box finds that house price dispersion in the United States has increased sharply over recent decades, and it increases when house prices in alternative investment destinations outside the United States rise. Both findings point to global investors contributing to house price synchronicity across cities and countries.”

F1

 

Continue reading here.

From IMF’s Global Financial Stability Report – April 2018:

“House price dispersion can be used as a proxy for demand from high-net-worth foreign investors with a preference for luxury housing. Using granular data from the US housing market, this box finds that house price dispersion in the United States has increased sharply over recent decades, and it increases when house prices in alternative investment destinations outside the United States rise.

Read the full article…

Posted by at 10:29 AM

Labels: Global Housing Watch

For Home Prices in London, Check the Tokyo Listings

From IMFBlog:

“If house prices are rising in Tokyo, are they also going up in London?

Increasingly, the answer is yes.

In recent decades, house prices around the world have shown a growing tendency to move in the same direction at the same time. What accounts for this phenomenon, and what are the implications for the world economy? These are questions that IMF economists explore in Chapter 3 of the latest Global Financial Stability Report.

Our study of 44 cities and 40 advanced and emerging-market economies shows that the growing integration of financial markets plays an important role. As a result, housing markets in one country are more sensitive to swings in another. Policy makers should pay attention, because the heightened tendency for house prices to move in tandem may signal greater odds of an economic slowdown.  An economic shock in one part of the world is more likely to affect housing markets elsewhere.

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Let’s look at why home prices are more synchronized in a financially integrated world.

  • Interest rates: The world’s major central banks have kept interest rates unusually low for a long time in a bid to stimulate growth. That has produced a ripple effect of low borrowing costs, including cheap mortgages, across the globe, which has helped push up prices.
  • Institutional investors , private equity firms, and Real Estate Investment Trusts have been increasingly active in major cities such as Amsterdam, Sydney, and Vancouver as they seek out higher returns.
  • Wealthy individuals have also snapped up properties in major financial centers in search of safe places to invest their money (and perhaps to live). One result: because the wealthy prefer high-end properties, their investments push up prices in expensive neighborhoods in places like New York and London at the same time.
  • Economic growth: In addition to financial factors, coordinated movements in the real economy contribute to the phenomenon. In 2017, growth picked up in 120 economies, accounting for three-quarters of world GDP. It was the broadest synchronized growth surge since 2010. Economic growth is a major driver of demand for homes, and hence prices.

All of this suggests that house prices are starting to behave more like the prices of financial assets, such as stocks and bonds, which are influenced by investors elsewhere in the world. In countries that are more open to global capital flows, prices of both homes and equities tend to be more synchronized with global markets.”

 

Continue reading here

From IMFBlog:

“If house prices are rising in Tokyo, are they also going up in London?

Increasingly, the answer is yes.

In recent decades, house prices around the world have shown a growing tendency to move in the same direction at the same time. What accounts for this phenomenon, and what are the implications for the world economy? These are questions that IMF economists explore in Chapter 3 of the latest Global Financial Stability Report.

Read the full article…

Posted by at 10:25 AM

Labels: Global Housing Watch

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