The Unassuming Economist

“Housing prices have increased substantially in recent years. House prices have nearly doubled in real terms over the last decade and are 20 percent above the peak in 1996, driven mainly by prices in the capital and two other cities. (…) Mortgages have increased more recently but credit risks appear to be largely under control,” according to a new IMF report on Colombia. 

From the IMF’s latest economic report on Poland:

While the recent recovery in global housing markets is a welcome development, we need to guard against another unsustainable boom. says IMF’s Deputy Managing Director Min Zhu in a blog. He also gave the opening remarks at the Bundesbank/German Research Foundation/IMF Conference that took place recently. 

“By historical and international comparisons and some measures of affordability New Zealand’s house prices appear elevated (…). This in part reflects a limited housing stock from low housing investment in recent years and geographical constraints preventing a rapid housing supply response. With house price inflation running high, there remains the risk that expectations-driven, self-reinforcing demand dynamics and price overshooting could take hold.
The government’s steps to help alleviate supply bottlenecks, measures to tighten standards for
mortgage lending (…), and an increase in mortgage rates should help ease price pressures. But a sudden price correction—possibly triggered by a shock to household incomes or borrowing costs—could reduce consumer confidence, impact overall economic activity,
and hurt banks’ balance sheets,” according to the IMF’s new economic report on New Zealand. 

Prakash Loungani profiles Christopher Pissarides, winner of the 2010 Nobel Prize for work on unemployment and labor markets

NOBEL Prize awards for economics sometimes contain a touch of whimsy: they honor people with opposing views—such as the 1974 award to the left-leaning Karl Gunnar Myrdal and the libertarian Friedrich August von Hayek—or reach back to recognize academic achievements long forgotten. The 2010 award was given to a like-minded group: it recognized Peter Diamond, Dale Mortensen, and Christopher Pissarides, whose research coalesced in the 1990s into a workhorse model of unemployment and the labor market. And the time was right. In the aftermath of the Great Recession, 200 million people across the globe were unemployed, and getting them back to work was the most urgent economic policy task.

For Pissarides, a Cypriot of Greek descent, understanding unemployment has been his life’s work since the 1970s. It took 20 years of academic toil before the impact of his research started to transform the way economists think about unemployment—and then for its influence to seep through to policy. IMF chief economist Olivier Blanchard, a noted scholar of unemployment himself, says: “Chris persevered. And history has proven him right. There is an important lesson to researchers here. When you think you are right, don’t listen too much to others.”

Today, with everyone listening to him, Pissarides can use the bully pulpit afforded by the Nobel Prize to help address the unemployment crisis in Europe. He has supported some policies of the so-called troika of lenders—the European Commission, European Central Bank, and International Monetary Fund—but has been an outspoken critic of others (see box). He has been particularly active in his home country of Cyprus, where as head of the national economic council—akin to the Council of Economic Advisers in the United States—he advises the president on issues ranging from bank restructuring to the business model for Cyprus in the future. “Cyprus has some 10 TV channels,” says Pissarides, “and they are all chasing me for my views. Sometimes I want to retreat to my university office and lock the door. But I know if I do that, I will regret it. This is the time to help.”

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