The Unassuming Economist

From a new CESifo working paper by Kajal Lahiri & Cheng Yang

“We forecast New York state tax revenues with a mixed-frequency model using a number of machine learning techniques. We found boosting with two dynamic factors extracted from a select list of New York and U.S. leading indicators did best in terms of correctly updating revenues for the fiscal year in direct multi-step out-of-sample forecasts. These forecasts were found to be informationally efficient over 18 monthly horizons. In addition to boosting with factors, we also studied the advisability of restricting boosting to select the most recent macro variables to capture abrupt structural changes. Since the COVID-19 pandemic upended all government budgets, our boosted forecasts were used to monitor revenues in real time for the fiscal year 2021. Our estimates showed a drastic year-over-year decline in real revenues by over 16% in May 2020, followed by several upward nowcast revisions that led to a recovery to -1% in March 2021, which was close to the actual annual value of -1.6%.”

From VoxEU.ORG

Expectations data indicate the US is entering recession about now

By Alex Bryson, David Blanchflower 21 October 2021

“With the mass rollout of COVID-19 vaccinations and the attendant decline in COVID-related deaths in most advanced economies, and with many economic indices turning positive, it looks like most economies are on the road to recovery although the data paint a confusing picture. 

For example, in the spring of 2020, wage growth jumped sharply at the same time unemployment was rising. This was in both the US and the UK. Since then, unemployment has been falling while wage growth remains high. This implies the wage curve slopes up, which seems unlikely. But other metrics are telling a different story, most notably those capturing consumer and business sentiment.

Two series – from The Conference Board on business conditions, employment and income six months hence, and from the University of Michigan on the financial situation in a year and business conditions a year and five years hence – tell the same story: sentiment peaked in spring or early summer. And it has been falling precipitously since (Blanchflower and Bryson 2021a). This is true for the US as a whole and for the eight largest states for which The Conference Board collect data.”

Continue reading here.

On cross-country:

• Do Credit Conditions Move House Prices? – NBER
• Call for Papers: ESCP-TAU-UCLA Conference on Low-Income Housing Supply and Housing Affordability, June 14-16, 2022 – American Real Estate and Urban Economics Association
• Call for Policy Papers on Rethinking Cities for Resilience and Growth in the Post-COVID-19 World – Asian Development Bank Institute

On the US:   

• Should You Buy a Home in the US? – Project Syndicate
• NY Fed’s Williams says rising home prices don’t pose financial stability risks – Reuters
• America’s Housing Boom Will Keep Builders and Agents Busy. There is no more off season any more for housing as builders and buyers make up for lost time – Wall Street Journal
• Housing Market Shows Cracks With Price Cuts in Pandemic Boomtowns. In places like Boise, homebuyers are gaining an edge after a real estate frenzy. – Bloomberg
• The Market for Single-Family Rentals Grows as Homeownership Wanes. House hunters are attracted to the hassle-free living and lack of down payments, but there’s a trade-off: They give up the investment of owning a home. – New York Times
• Pelosi tries to salvage housing aid. The White House as of Friday was refusing to go above $150 billion for housing, according to two people familiar with the talks. – Politico
• How Private Equity Landlords are Changing the Housing Market – Cato Institute
• The Economic Burden of Pension Shortfalls: Evidence from House Prices – NBER
• New York Fed Releases White Paper on Effective Eviction Prevention and New Data Collection Efforts Focused on Renters and Landlords – New York Fed
• Why America’s real estate industry is so racist. MacArthur Fellow Keeanga-Yamahtta Taylor writes about how, 53 years after the Fair Housing Act, Black families still face rampant housing discrimination. – Fast Company
• Commercial Real-Estate Sales and Values Surge to Records. Investors hunting for yield gobbled up apartment buildings, life-science labs and industrial properties during the third quarter – Wall Street Journal
• Congress isn’t going to save the housing market. Build Back Better doesn’t build enough. – Vox

On China

• China expands property tax trials in next step of ‘common prosperity’ drive. Xi Jinping backs plan to test levy that could alter country’s economic model – FT
• China’s new property tax may prompt owners of multiple homes to sell down their holdings before prices take a hit, say analysts. – South China Morning Post
• How China Is Rolling Out a Property Tax on Homes, and Why – Bloomberg
• Another Chinese property developer defaults, shares drop – Reuters
• The effect of homeownership on migrant household savings: Evidence from the removal of home purchase restrictions in China – Economic Modelling

On other countries:  

• [Germany] In Berlin 85% of people rent their homes — and prices are spiralling. The end of a rental cap and a shortage of stock are making the German capital unaffordable for many – FT
• [Hong Kong] Hong Kong house prices fall by the most in nearly a year as volatile stock market hits buying sentiment – South China Morning Post
• [Italy] Why Americans and Britons Are Rushing to Buy Idyllic Homes in Italy. A range of tax incentives, relatively lower prices and the potential for working remotely is driving up demand from house hunters overseas. – Bloomberg
• [Namibia] How innovative construction could ease Namibia’s housing crisis – World Economic Forum
• [Singapore] The go-go property market doesn’t have legs. Stretched valuations, worsening demographics and policy risks are flashing warning signs – The Straits Times
• [Thailand] Thai central bank eases mortgage rules to support property sector – Reuters
• [United Kingdom] Will the UK embrace long fixed-rate home loans? Lenders have been slow to heed Boris Johnson’s call to action on mortgage terms – FT

From VoxEU post by Gérard Roland:

“The great Hungarian economist János Kornai, who passed away in October 2021, was a pioneering analyst of shortages, socialist economies and the economics of transition to a market economy. This column outlines what made him one of the most important intellectuals of the twentieth century.

The famous Hungarian economist János Kornai has left us. He was one of the most important intellectuals of the twentieth century. He suffered personally from both Nazism and communism, the two totalitarian regimes of the twentieth century. As a young Jew growing up in Budapest, he lost his father and a brother to the Nazis. Like many young Jews in Central Europe who survived the holocaust, he was for a couple of years an enthusiastic supporter of communism, the arch-enemy of Nazism. He became disillusioned after a few years, especially when learning about the Stalinist purges in Hungary in the early 1950s. He had been a journalist at that time.

His doctoral dissertation in economics, Overcentralization in Economic Administration, was full of facts about the flaws of central planning and represented a great breath of fresh air in the intellectual atmosphere of the times. He defended that dissertation just before the Soviet repression of the Hungarian revolution of 1956. His defence was attended by a big crowd and was one of the important intellectual events of that year. Given the visibility of his doctoral thesis, when the repression came, he lost his job at the Institute of Economics (later a hotbed of thinking about reforms), was interrogated, and eventually got marginal jobs, first at the Light Industry Planning Bureau and later at the Textile Industry Research Institute. 

Instead of becoming discouraged or cynical, he used the free time he had in these obscure jobs to study economics seriously and to get better acquainted with economic research that was being practiced in the West, on the other side of the Iron Curtain. His work on two-level planning with Tamás Lipták was published in Econometrica and became an important paper in the literature on the economics of planning. This earned him the recognition of top economists of the time: Kenneth Arrow, Leonid Hurwicz, Tjalling Koopmans, Edmond Malinvaud and others. The Hungarian authorities, who were more liberal than other communist regimes, even allowed him to travel to conferences in the West, albeit under heavy supervision of the secret police. 

Instead of ‘just’ becoming Central and Eastern Europe’s top economist (together with the more senior Leonid Kantorovich, the inventor of linear programming, who received the Nobel prize in 1975), he wrote in 1971 a book with the provocative title Anti-Equilibrium that represented a thorough criticism of the relevance of general equilibrium theory, the crown jewel of economic theory. That book also proposed to add considerations related to the informational sphere of the economy, developing themes such as informational asymmetry, bargaining, conventions, routines, aspirations – topics that would be developed later by other economists.”

Continue reading here.

On cross-country:

• IMF urges caution as house prices surge globally – Irish Examiner
• Creating Housing Markets in Emerging Market Economies – IFC
• Warning: Some Transaction Prices can be Detrimental to your House Price Index – University of Graz

On the US:   

• RV Capital of America Tops WSJ/Realtor.com Housing Index in Third Quarter. Index ranks cities for appreciating housing markets and lifestyle amenities – Wall Street Journal
• Construction on new homes slows as supply-chain woes hit the housing market. The number of housing projects completed in September fell to the lowest level in over a year – Market Watch
• U.S. homebuilding stumbles as supply constraints mount – Reuters
• Another upward force on American inflation: the housing boom. Property could join energy, shipping, used cars and wages as a contributor to rising consumer prices – The Economist
• Immediate and Longer-Term Housing Market Effects of a Major U.S. Airport Closure – NBER
• Do Restrictive Land Use Regulations Make Housing More Expensive Everywhere? – Economic Development Quarterly
• Psychoanalyzing the Housing Frenzy With Redfin’s CEO. The emotional and financial stakes of buying a home have never been higher. – Curbed

On China

• China new home prices hit by first month-on-month fall since 2015. Data reveal price decline in big cities in September as weakness in real estate sector reverberates – FT
• Chinese developer Sinic defaults as Evergrande deadline looms. More companies miss debt payments as country’s real estate sector contracts in third quarter – FT
• Evergrande: concerns linger even as embattled developer’s Hengda unit makes interest payment on US$327 million onshore bond. – South China Morning Post
• Evergrande’s debt crisis sates appetite for risk, forcing 206 plots to withdraw from China’s land auctions since September – South China Morning Post
• Housing slowdown threatens China’s economic muscle – Axios
• China’s property and construction sectors contract in third quarter as Evergrande crisis and tougher regulation hit home – South China Morning Post
• In Tackling China’s Real-Estate Bubble, Xi Jinping Faces Resistance to Property-Tax Plan. After negative feedback from within the party, an initial proposal to test a property tax in some 30 cities has been significantly scaled down – Wall Street Journal
• Time for orderly resolution for Evergrande is running out. If the state has a grand plan, it will need to make it known soon – The Economist

On other countries:  

• [New Zealand] New Zealand plans new housing density laws to tame red-hot property market – Reuters
• [New Zealand] Sweeping housing legislation could reshape New Zealand cities for decades to come. Housing campaigners welcome changes, saying they will boost businesses, lower emissions and enable better transport links – The Guardian
• [Turkey] Housing prices in emerging countries during COVID-19: evidence from Turkey – International Journal of Housing Markets and Analysis
• [United Kingdom] The problem with new-build property. It loses its premium over time, so mortgage providers are more reluctant to lend to those with small deposits – FT