Tuesday, September 2, 2014

House Prices in Czech Republic

"(...) while real estate prices are in a modest recovery trend," says the IMF's annual economic report on Czech Republic.

House Prices in Slovak Republic

"Strong household credit growth reflects substantial home refinancing and some equity withdrawals. While borrowing can help support a recovery in domestic demand, competition among banks has made high LTVs more common (e.g., through higher LTV mortgages or topping up regular mortgages with housing loans). Although real estate prices remain subdued and household debt is not high, this practice could lead to overborrowing by consumers. Adoption of a regulation on LTV or debt-to-income ratios could help prevent an excessive build-up of risks for borrowers and banks," according to latest IMF economic report on Slovak Republic.

Sunday, August 31, 2014

House Prices in Norway

"House prices in Norway rose strongly in recent years but stabilized in late 2012. Various factors have been contributing to rising house prices, including high income and wage growth, immigrant inflows, and supply constraints. Nevertheless, there are signs of overvaluation with a sustained increase in the price-to-income ratio and a large deviation in the price-to-rent ratio from its historical average. Staff’s updated estimates on house price valuation gaps, based on the three measures of valuation used in the background papers for the 2013 Nordic Regional Report and Norway Article IV report, suggest a slight correction in the degree of overvaluation in 2013, but prices remain above equilibrium by varying degrees according to different estimates," says the IMF's new annual economic report on Norway.

House Prices in Sweden

"A longer-term solution to rising house prices and mortgage levels will require alleviating housing supply constraints. Insufficient housing supply growth is a fundamental factor behind the rise in residential property prices, especially in metropolitan areas, where ongoing urbanization and immigration trends boost demand. This has resulted in higher housing prices, driving up the size of mortgages. While some steps have been taken, containing house price pressures will require a continuing effort to expand the stock of affordable housing and further reforms to zoning, permitting, and the rent-setting process. Public infrastructure investments, coordinated with municipalities, would also make private housing investments more attractive," according to the IMF's latest economic report on Sweden. 

Also, see an overview of the macroprudential policies in Sweden. 

Wednesday, August 27, 2014

Are You Cut Out To Be A Macroeconomist? A Simple Test

Try this at home. The chart below shows you the relationship between unemployment and output (to be precise, it is the relationship between the change in unemployment and output growth). The chart is automatically updated, starting with the relationship as it appeared in 1948 to 1963, and then adding 10 additional years at a time to bring it all the way to the present. (You can also click on this link to see these charts: Okun’s Law Over Time.) Now here’s the first question on the test: Do you think the relationship shown in these charts has remained strong and stable over time?

Here’s the link to another macroeconomic relationship, this one between unemployment and inflation. Same deal: first you see the relationship over the 1948 to 1963 period and the charts that follow add 10 years at a time. (You can also click on this link to see these charts: Phillips Curve Over Time.) Second question on the test: Do you think the relationship shown in these charts has remained strong and stable over time?

If you are suspecting a trick you are right. To the lay person, it probably seems that the first relationship, known as Okun’s Law, is strong and stable and the second relationship, known as the Phillips Curve, is weak and unstable. But macroeconomists actually worry a lot that Okun’s Law is dead. And—using special goggles known as ‘econometrics’—they are able to see the Phillips Curve where the lay person may just see a cloud.

Robert Gordon, a renowned macroeconomist, for example has proclaimed the demise of Okun’s Law and noted that, in contrast, the Phillips Curve is ‘alive and well’. This is what keeps macroeconomics interesting: things may not be what they seem. (For what it’s worth, I think that Okun’s Law is alive and well and that the Phillips Curve is being kept alive with artificial resuscitation—but then I’m closer to a lay person than to a renowned macroeconomist.)