The Unassuming Economist

A new economic letter by Michael Bauer says that “Interest rates are inherently difficult to predict, and the simple random walk benchmark has proven hard to beat. But macroeconomics can help, because the long-run trend in interest rates is driven by the trend in inflation and the equilibrium real interest rate. When forecasting rates several years into the future, substantial gains are possible by predicting that the gap between current interest rates and this long-run trend will close with increasing forecast horizon. This evidence suggests that accounting for macroeconomic trends is important for understanding, modeling, and forecasting interest rates.”

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A new IMF report finds that “Societal attitudes in which males contribute to household work could be a powerful lever both to increase female labor force participation, and increase fertility. If women can get more child rearing support from their husbands, it would be easier for them to continue to work. However, with 85 percent of full-time employees working overtime, it is difficult in reality to share the childcare burdens among a working couple if both of them have regular works. Men’s commitment to house work and family responsibilities can have a significant impact on fertility. Data suggests that the more time spent by a husband in house work and childcare, the higher the changes that couples will have a second child.”

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From a new IMF report on Japan:

“Housing prices have been on the rise in some geographic areas and market segments, despite the declining population. Condominium prices have increased by 23 percent at the national level since 2013 (Figure 8). Historically low mortgage rates and recent changes in the inheritance tax are contributing to demand pressures, with little response in the number of new houses put on the market. Some overheating in the housing market is also indirectly suggested by house price-to-income ratios. Growth in real estate loans has been higher than other loans and the amount outstanding by domestic and Shinkin banks reached a record high at end-December 2016 (FSR, April 2017).”

 

 

“Condominium prices appear to be moderately overvalued in Tokyo, Osaka, and several outer regions. While results should be interpreted with caution given data limitations and model uncertainty, an econometric analysis using city data shows that condominium prices in Tokyo and Osaka started exceeding values predicted by fundamentals in 2013, suggesting an overvaluation in the 15−20 percent range. A regional analysis also indicates that condominium prices may be moderately above their equilibrium values, with the degree of overvaluation in the 5−10 percent range (Figure 9).”