The Unassuming Economist

From a new IMF report:

“Rwanda has been one of the fastest growing economies in sub-Saharan Africa, and emerged as a global leader in promoting gender equality. Over the past ten years, economic growth has averaged 7.7 percent, with per capita income close to doubling to $729 in 2016. Between 2004 and 2014, the poverty rate declined by almost 18 percentage points to 39 percent while extreme poverty declined to 16 percent.

Rwanda’s advances in gender equality emerged, in part, as a necessary component of the rebuilding and development strategy from the mid-1990s, with women taking on new roles as major actors in society and heads of households. Today, the role of Rwandan Women is celebrated, as evident in many aspects elaborated further in this paper. Gender equality as an integral component of its development agenda—with advocacy at the highest level, constant engagement in programs to enhance economic opportunities for women, home-grown solutions to address gender inequality, an enabling legal framework and supporting institutions—such as a dedicated gender “machinery”: the Ministry of Gender and Family Promotion, the Gender Monitoring Office, the National Women Council, and the Forum for Women Parliamentarians. The provision of gender disaggregated data has increased (NISR 2016: National Gender Statistics Report), and allows a timely assessment of the main indicators.

In parallel, indicators of gender equality have improved significantly (Figure 4), and the World Economic Forum’s 2016 Gender Gap Index ranks Rwanda number 1 among all low-and-middle-income countries in closing the gender gap. Rwanda also positioned itself as number 5 worldwide, and one of only five countries to have ever reached a score of more than 80 out 100. Globally, Rwanda also ranks second in the UN’s 2015 Gender Development Index and has the lowest level of gender inequality, as measured by the Gender Inequality Index in sub-Saharan Africa.”

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A new IMF study on says that:

“Low interest rates and abundant liquidity globally has led to significant demand pressures on housing markets around the world. Economies have tackled growing imbalances with the continued tightening of prudential-based tools and, in some cases, targeted tax measures. While the outcomes of these policies are not straightforward to assess, and up-to-date empirical evidence is not readily available for the individual economy cases, the measures likely have slowed down increases in house prices and household indebtedness, and improved the resilience of the financial sector to housing market related shocks. The trend towards coordinating prudential measures with tax-based measures is likely to improve the overall effectiveness of macroprudential policy in cases when speculative and investment demand play a major role.”

Another IMF study on Canada says that:

“The aim of this paper is to assess which macroprudential policy measures have been effective in containing house price and mortgage credit growth in Canada and other economies. Our analysis indicates that macroprudential policy measures have had a moderating effect on house prices and mortgage credit in Canada since 2010. International experience suggests that lower caps on debt-service-to-income (DSTI) ratios and loan-to-value ratios could be effective in containing both mortgage credit and house price growth.”

 

 

IMF’s latest report on Germany says that:

“At the aggregate level, housing affordability remains good, and price developments moderate in international comparison, but growing regional differences warrant close monitoring. House prices have continued to accelerate but their level remains moderate, as do various indicators of mortgage affordability (price-to-rent, price-to-income). However, the picture is different when regional developments are considered. While house prices continue to fall in some rural areas, price growth has reached double-digits in large cities and university towns. In certain urban areas, overvaluation may amount to 30 percent according to the Bundesbank’s latest estimates. While there is no comprehensive data available on regional mortgage growth, there is some anecdotal evidence of looser underwriting standards in some areas.

Relaxing housing supply constraints would help mitigate price pressures. Last year the government adopted a package of measures to address supply shortages and improve affordability. The plan is progressing in coordination with local authorities and includes stepping up the sales of federally-owned land and properties below market price for affordable housing projects, more funds for social housing, and the promotion of building code harmonization. However, the authorities estimate that the supply of new housing units remained below demand in 2016. To significantly boost supply in the short term, these measures must be complemented by further encouragement for local authorities to relax zoning and height restrictions in areas under pressure. Lowering the effective transaction tax rate on new construction, as recommended by staff in the past, would also be helpful in this regard.

New legislation introducing macroprudential instruments for the real estate market was approved, but left the toolkit incomplete and important data gaps unaddressed. The new legislation broadens the macroprudential toolkit to include loan-to-value and amortization requirements, but does not include either debt-to-income or debt-service-to-income limits— instruments designed to limit borrower vulnerability to income and interest rate shocks, and ensure affordability. Most importantly, the new law does not include any provision for a granular, loan-by loan database, a central tenet of past staff recommendation to ensure the effective implementation of macroprudential tools. At a minimum, a regular (at least annual) survey should be conducted in hotspots to collect information on individual loans, and assess household leverage, loan affordability and the concentration of banks’ exposure.”

On cross-country:

• Global Residential Cities Index – Q1 2017 – Knight Frank
• Economic Activity, Credit Market Conditions, and the Housing Market – Macroeconomic Dynamics

On the US:

• FED Governor Jerome H. Powell on The Case for Housing Finance Reform – Speech, Event Video, and Coverage: Financial Times
• Are Home Prices Really Above Their Pre-Recession Peak? – Harvard Joint Center for Housing Studies
• Housing Sentiment at Record High as Consumers’ Confidence in Home-Selling Environment Strengthens – Fannie Mae
• What you want to know about California’s failed housing affordability law – Los Angeles Times
• It’s time for cities to start building their fair share of housing – Los Angeles Times

On other countries:

• Australian Housing ‘Bubble’ Fears Overblown, HSBC Economist Says – Bloomberg
• [Canada] Rental Ownership Structure in Canada – Canada Mortgage and Housing Corporation
• [Canada] Ontario’s One Cylinder Economy: Housing in Toronto and Weak Business Investment – Fraser Institute
• [Canada] Restrictive Land-Use Regulation: Strategies, Effects and Solutions – Frontier Centre for Public Policy
• [China] Relationship between the Chinese housing and marriage markets – VoxDev
• [China] The bubble dynamics of China’s housing boom – VoxDev
• [Germany] Cheap credit not fuelling German real estate bubble for now- central banker – Reuters
• [Norway] Are House Prices Overvalued in Norway? – IMF
• [Switzerland] UBS and Credit Suisse cut back on domestic mortgages – Financial Times

From a new IMF report:

“Inclusive growth is a priority that resonates globally today. It relates to a broad sharing of the benefits of, and the opportunities for, economic growth, and reflects growth that is robust and broad-based across sectors, promotes productive employment across the labor force, embodies equal opportunities in access to markets and resources, and protects the vulnerable.

The G20 has emphasized the need for inclusive growth. In this regard, the Hangzhou G20 leaders’ Summit in September 2016 renewed the emphasis on inclusive growth called for the forging of both a narrative for strong, sustainable, balanced and inclusive growth and for adopting a package of policies to make this possible. The communique stated that the G20 would “work to ensure that our economic growth serves the needs of everyone and benefits all countries and all people including in particular women, youth and disadvantaged groups, generating more quality jobs, addressing inequalities and eradicating poverty so that no one is left behind.” G20 Ministers returned to this in March 2017 in Baden-Baden noting that: “We reiterate our determination to use all policy tools––monetary, fiscal and structural––individually and collectively to achieve our goal of strong, sustainable, balanced and inclusive growth, while enhancing economic and financial resilience.”

Economic growth and inequality, the two sides of inclusion, have a complex nexus that can generate tradeoffs. Growth is the basis for generating inclusion. Across countries, growth has been instrumental in narrowing income gaps; within countries, growth has reduced poverty and made possible higher living standards and job opportunities. But policies driven by an exclusive growth focus can also set back inclusion in certain circumstances. While some inequality is integral to a market economy, high and persistent inequality can undermine the sustainability of growth itself.”

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