The Unassuming Economist

“A strong housing market is becoming a potential source of risk. Mortgage rates are at historic lows and have boosted new mortgage lending to a 10-year high, thus putting upward pressure on prices. Residential housing offer prices increased by 10 percent y-o-y in 2015:Q4, despite a 16 percent increase in housing starts. A slight deterioration in the affordability-of-housing indicators has taken place recently despite strong wage growth and a continued decline in interest rates. On the other hand, the estimated average apartment price-to-annual wage ratio of 4 is still low by international standards. (…) Going forward, continued vigilance will be needed and, if current trends in the mortgages segment continue in the coming months, the macroprudential stance should be further tightened. Preference should given to targeted measures, including raising risk weights on mortgages, lowering LTV limits with possible regional differentiation, and issuing clear guidance on maximum debt-to income limits”, says IMF’s report on Czech Republic.

An IMF report notes: “Poland is facing a rapidly aging population, which is expected to weigh on public finances and economic growth. Yet, there is an important underutilized source of qualified labor—Poland’s women. Women in Poland are on average just as educated as men and have a longer potential working lifespan. Nonetheless, female labor force participation is low relative to that for men and low relative to that in many other European countries. Unlocking this valuable source of growth would require leveling the playing field between men and women in the workplace, including by providing high quality affordable childcare for young children, removing tax disincentives for the second earner in a family, and allowing the retirement age to increase as envisaged by the 2013 reforms. For Poland to unleash its full economic potential, it needs to embrace the vital contribution that women can make to its economy.”

A new IMF working paper notes: “In November 2014, OPEC announced a new strategy geared towards improving its market share. Oil-market analysts interpreted this as an attempt to squeeze higher-cost producers including US shale oil out of the market. Over the next year, crude oil prices crashed, with large repercussions for the global economy. We present a simple equilibrium model that explains the fundamental market factors that can rationalize such a “regime switch” by OPEC. These include: (i) the growth of US shale oil production; (ii) the slowdown of global oil demand; (iii) reduced cohesiveness of the OPEC cartel; (iv) production ramp-ups in other non-OPEC countries. We show that these qualitative predictions are broadly consistent with oil market developments during 2014-15. The model is calibrated to oil market data; it predicts accommodation up to 2014 and a market-share strategy thereafter, and explains large oil-price swings as well as realistically high levels of OPEC output.”