The Unassuming Economist

From a paper by Remi Jedwab, Elena Ianchovichina, and Federico Haslop:

“Census data for 7000 cities – three fourth of the world’s urban population – reveal that cities of the same population size in countries with similar development levels differ substantially in terms of their employment composition, especially in the developing world. Using these data, we classify cities into production cities with high employment shares of urban tradables (e.g., manufacturing or business services), consumption cities with high employment shares of urban non-tradables (e.g., retail and personal services), or neutral cities with a balanced mix of urban tradables and non-tradables. After establishing stylized facts regarding the sectoral distribution of employment in our global sample of cities, we discuss the various paths by which developing nations may urbanize through production cities – via industrialization or tradable services – or consumption cities – via resource exports, agricultural exports, or deindustrialization. Country and city-level data corroborate our hypotheses. Results on the construction of very tall buildings also provide suggestive evidence on the relationship between resource exports and consumption cities. Importantly, consumption cities seem to present lower growth opportunities than production cities, diminishing the role of cities as “engines of growth.” Understanding how sectoral structure mediates the urbanization-growth relationship and how consumption cities become production cites is thus highly relevant for policy.”

1. Housing View – February 2, 2024
2. Housing View – January 5, 2024
3. Housing View – January 19, 2024
4. Housing View – March 1, 2024
5. Housing View – July 26, 2024
6. Housing View – February 23, 2024
7. Housing View – January 26, 2024
8. Housing View – January 12, 2024
9. Housing View – August 23, 2024
10. Housing View – March 22, 2024

From a paper by Zaid Tahat:

“This thesis investigates the dynamic linkages among financial, industrial, service, and general
indices of the Amman Stock Exchange (ASE) in Jordan from 2000 to 2020 using a vector
autoregression (VAR) model and by using daily data. The main aim is to provide a
comprehensive understanding of the interrelationships among these key sectors over the 21-year
period. The objectives are to examine both short-term and long-term dynamic linkages, assess
the model’s explanatory power for variations in sector indices, and derive insights for investors
and policymakers.

The study employs a VAR methodology to capture the dynamic interactions among the sector
indices. Daily data on sector indices is analyzed using Granger causality tests, impulse response
functions, and variance decomposition to quantify the linkages.

The findings reveal significant dynamic linkages among ASE sector indices. The VAR model
exhibits high explanatory power, with R-squared and adjusted R-squared values above 99% for
all sectors. Granger causality tests indicate bi-directional causality between the financial and
general indices and between the service and industrial indices. Impulse response functions show
that shocks to each sector have significant effects on the other sectors that persist over several
days. Variance decomposition analysis attributes 27-38% of forecast error variance in each
sector to innovations in other sectors, affirming the importance of intersectoral relationships.
The empirical evidence can inform portfolio diversification and risk management strategies for
investors. For policymakers, the findings underscore the importance of considering spillover
effects in regulatory frameworks governing the financial sector and capital markets.

To mitigate systemic risk and promote stability, policymakers could consider implementing
macroprudential policies such as countercyclical capital buffers, exposure limits, and liquidity
requirements that account for the interconnectedness of sectors. Enhancing transparency through
disclosure requirements and stress testing that incorporate intersectoral linkages could also help
monitor and manage systemic risk. Coordination among regulators overseeing different sectors
may be warranted to address cross-sector vulnerabilities. Overall, a holistic approach that
recognizes the dynamic linkages among sectors is recommended to foster a resilient financial
system.”

From a paper by Nasser Khiabani  and Solaleh Tavassoli:

“This study reviews the evolution of national and regional housing models that developed and received much attention in the housing economics literature. From this point of view, first, we focus our attention on the econometric modeling of national housing markets and discuss their limitations in twofold: inferring individual-level relations from aggregate-level data or aggregate shocks, and assuming spatial homogeneity in all regions. These two problems will be addressed precisely in the newly developed regional housing market models by identifying the sources of cross-sectoral dependence, namely, spatial and temporal dependence. Spatial dependence refers to how spatial factors influence economic processes. It is measured through a spatial weighting matrix. Cross-sectional dependence stemming from common factors is attributed to economy-wide shocks that affect all individuals with different intensities coming from different macro shocks, such as interest rates, oil prices, and technology shocks.”

From a paper by David M. Brickman:

“Over the past four decades, the multifamily housing market has grown and evolved significantly to become a much more prominent part of the US housing landscape. Since 1990, the total value of the multifamily housing stock has grown more than tenfold, from less than $600 million to more than $6
billion today, as both the number and value of multifamily housing units have steadily increased. Although a broad range of macroeconomic and demographic factors have contributed to this growth, the primary catalyst has been the establishment of well-functioning multifamily capital markets, defined by large liquid debt and equity markets and a largely unconstrained private rental market. Against this backdrop, multifamily housing has become a standout among commercial real estate in terms of capital flows and performance while disproportionately contributing to the nation’s supply of newly constructed housing at this moment of intense shortages and affordability challenges.

Given the success of the modern multifamily capital and housing markets, there is value in understanding their development to identify market areas in need of additional investment and to inform regional and global markets elsewhere. To that end, this brief identifies and examines key moments in the evolution of multifamily debt and equity flows from the late 1980s through today and their impact on capitalization rates, property values, housing supply, rental rates, and rent growth. The brief concludes with a discussion of policy implications.”

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