The Unassuming Economist

On cross-country:

• Social rental intermediation. How private landlords can contribute to solve the housing crisis? – Housing Europe
• What are some of the primary driving forces behind the Urban Housing Crunch? – Forbes
• What if the future of housing means accepting that a home isn’t permanent? – Quartz
• Macroprudential approaches to non-performing loans – ESRB

On the US:

• How Monetary Policy Shaped the Housing Boom – New York University
• Inside the Rise and Fall of a Multimillion-Dollar Airbnb Scheme – New York Times
• Rents Are Up? That Depends on Where You Live – New York Times
• California housing crisis podcast: Will a boom in building make housing more affordable? – Los Angeles Times
• UCLA Ziman Program – a First Nationwide – Teaches Affordable Housing Development – UCLA
• U.S. housing outlook stuck in a lull as economy dulls: Reuters poll – Reuters
• Home Prices in 20 U.S. Cities Rise by Least in Four Years – Bloomberg
• Real House Prices and Price-to-Rent Ratio in December – Calculated Risk
• Trouble In The Housing Market – Forbes
• Slowing Home Price Growth and Construction Hit Housing Market – Wall Street Journal
• Is Housing in Your City Getting Unaffordable? Here’s How You Can Help – Citylab
• Can housing reform survive a hall of mirrors? – Boston Globe
• Seattle-area home price cooldown not reaching cheaper parts of housing market – Seattle Times
• California’s housing supply law fails to spur enough construction, study says – Los Angeles Times

On other countries:

• [Australia] Australian Home Lending Now Weakest Since the Mid-1980s – Bloomberg
• [Australia] House price falls in Sydney and Melbourne not all bad, Reserve Bank head says – The Guardian
• [Australia] Australia’s housing data still terrible across the board – Variant Perception
• [Canada] Affordable housing becomes singular focus of Toronto’s new real estate czar – Globe and Mail
• [Canada] Bank of Canada says housing crunch threatens Canadian economy – Fraser Institute
• [Canada] Canada’s housing market set for years of subdued price rises: Reuters poll – Reuters
• [Canada] Another budget, another missed opportunity to tackle B.C.’s housing shortage – Fraser Institute
• [China] Capital Gains Tax would see house prices fall as investors flee market ahead of tax’s implementation – REINZ – New Zealand Herald
• [China] China’s Huge Number of Vacant Apartments Are Causing a Problem – Citylab
• [Denmark] Danish Study Quantifies Impact of House Prices on Consumption – Bloomberg
• [Hong Kong] Why Hong Kong Is Claiming Golf Greens for New Housing – Citylab
• [India] India Cuts Tax on Housing to Boost Real Estate Before Elections – Bloomberg
• [Ireland] Ireland’s house price rises continue, albeit at a much slower pace – Global Property Guide
• [Israel] Changes in the share of first home buyers among young people, based on income level – Bank of Israel
• [Netherlands] House prices expected to keep rising this year, homeownership unattainable for more and more people – Rabobank
• [New Zealand] New Zealand Locks the Doors From the Inside – New York Times
• [New Zealand] Sale of portable cabins booms in New Zealand amid housing crisis – The Guardian
• [Sweden] Refugees and apartment prices: A case study to investigate the attitudes of home buyers – Regional Science and Urban Economics
• [United Kingdom] No-deal Brexit would take a chip off UK home values – Reuters poll – Reuters
• [United Kingdom] Housing costs: Five surprises explained – BBC
• [United Kingdom] A solution to the housing crisis? – Financial Times

From a VoxEU post by Davide Furceri, Swarnali Ahmed Hannan, Jonathan D. Ostry, Andrew Rose:

“It seems an appropriate time to study what, if any, have been the macroeconomic consequences of tariffs in practice. Using a straightforward methodology to estimate flexible impulse response functions, and data that span several decades and 151 countries, this column finds that tariff increases have, on average, engendered adverse macroeconomic and distributional consequences: a fall in output and labour productivity, higher unemployment, higher inequality, and negligible effects on the trade balance (likely owing to real exchange rate appreciation when tariffs rise). The aversion of the economics profession to the deadweight loss caused by protectionism seems warranted.

 

One of the most pressing issues on the international agenda these days is protectionism. The US’ trade war with China has created international tension that is infecting stock markets worldwide, exacerbated by other disputes such as the renegotiation of NAFTA, Brexit, and US steel and aluminium tariffs. One ingredient curiously absent from this turbulence is disagreement among the experts on the merits (or lack thereof) on the underlying issue. Indeed, more than on any other issue, there is agreement amongst economists that international trade should be free.¹

Economists have been aware of the senselessness of protectionism since at least Adam Smith. In general, economists believe that freely functioning markets best allocate resources, at least absent some distortion, externality or other market failure; competitive markets tend to maximise output by directing resources to their most productive uses. Of course, there are market imperfections, but tariffs – taxes on imports – are almost never the optimal solution to such problems. Tariffs encourage the deflection of trade to inefficient producers and smuggling to evade the tariffs; such distortions reduce productivity, income and welfare. Further, consumers lose more from a tariff than producers gain, so there is ‘deadweight loss’ as well as inequality (if production tends to be owned by the rich).  The redistributions associated with tariffs tend to create vested interests, so harms tend to persist. Broad-based protectionism can also provoke retaliation which adds further costs.  All these losses to output are exacerbated if inputs are protected, since this adds to production costs.

Discussions of market imperfections and the like are naturally microeconomic in nature (Grossman and Rogoff 1995). Accordingly, most analysis of trade barriers focuses on individual industries. International commercial policy tends not to be used as a macroeconomic tool, probably because of the availability of superior alternatives such as monetary and fiscal policy. In addition, there are strong theoretical reasons that economists abhor the use of protectionism as a macroeconomic policy; for instance, the broad imposition of tariffs may lead to offsetting changes in exchange rates (Dornbusch, 1974). And while the imposition of a tariff could reduce the flow of imports, it is unlikely to change the trade balance unless it fundamentally alters the balance of saving and investment. The findings of recent studies on the impact of trade would imply that tariffs could hurt output and productivity (Feyrer 2009, Alcala and Ciccone 2004). Further, economists think that protectionist policies helped precipitate the collapse of international trade in the early 1930s, and this trade shrinkage was a plausible seed of WWII. So, while protectionism has not been much used in practice as a macroeconomic policy (especially in advanced countries), most economists also agree that it should not be used as a macroeconomic policy.

The here and now

Times change. Some economies – notably the US – have recently begun to use commercial policy seemingly for macroeconomic objectives. So it seems an appropriate time to study what, if any, the macroeconomic consequences of tariffs have actually been in practice. Most of the predisposition of the economics profession against protectionism is based on evidence that is either a) theoretical, b) micro, or c) aggregate and dated. Accordingly, in our recent research (Furceri et al. 2018), we study empirically the macroeconomic effects of tariffs using recent aggregate data.”

Continue reading here.

From an IMF working paper by Nicoletta Batini:

“France is the top agricultural producer in the European Union (EU), and agriculture plays a prominent role in the country’s foreign trade and intermediate exchanges. Reflecting production volumes and methods, the sector, however, also generates significant negative environmental and public health externalities. Recent model simulations show that a well-designed shift in production and consumption to make the former sustainable and align the latter with recommended values can curb these considerably and generate large macroeconomic gains. I propose a policy toolkit in line with the government’s existing sectoral policies that can support this transition.”

From a paper by Charles Ka Yui Leung and Joe Cho Yiu Ng:

“This paper aims to achieve two objectives. First, we demonstrate that with respect to business cycle frequency (Burns and Mitchell, 1946), there was a general decrease in the association between macroeconomic variables (MV) and housing market variables (HMV) following the global financial crisis (GFC). However, there are macro-finance variables that exhibited a strong association with the HMV following the GFC. For the medium-term business cycle frequency (Comin and Gertler, 2006), we find that while some correlations exhibit the same change as the business cycle counterparts, others do not. These “new stylized facts” suggest that a reconsideration and refinement of existing “macro-housing” theories would be appropriate. We also provide a review of the recent literature, which may enhance our understanding of the evolving macro-housing-finance linkage.”

A new IMF working paper revisits ” the issue of classification errors in the U.S. Current Population Survey. While the results still support the previous literature’s conclusion that the job finding probability plays a more important role in explaining unemployment fluctuations (“outs of unemployment”) than the job separation probability does (“ins to unemployment”), they moderate the conclusion that “Out Wins”. Moreover, once the proposed adjustment is applied, the importance of the participation margin in explaining unemployment fluctuations becomes smaller than previously argued—around 10 percent in this paper vs previous estimates of 20 to 30 percent (Elsby, Hobijn and Sahin, 2015). Therefore, the misclassification correction procedures in the labor force survey continue to be an important issue in understanding labor market dynamics. The results of this paper suggest that policymakers should pay closer attention to the job separation margin than previously thought and less on the participation margin.”