Job market candidate
C. Ramon Trias Fargas, 25-27
Tel. +34 93 542 1621
Available for interviews at:
Simposio de la Asociación Española de Economía (SAEe), December 15-17, Bilbao, Spain
Allied Social Science Associations (ASSA), January 6-8, Chicago, US
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Macroeconomics, Macro-Finance, Real Estate, House Price Fluctuations and Bubbles, Macro-Prudential Policy, Experimental Economics
"Preference for Housing Services and Rational Housing Bubbles" (Job Market Paper)
There is a strong negative cross-country correlation between the share of consumption households spend on housing services and house price bubbles. Countries that spend less on housing services as a share of total consumption, experienced significantly more housing price booms and busts during the period 1970 -2013, and the associated housing boom-bust cycles were more violent. This paper proposes an overlapping generation (OLG) model that replicates this fact by separating the consumption and investment side of a real estate asset. When agents have lower preferences for housing services, this model economy will be characterized by lower expenditure shares on housing services and will be more prone to house price bubbles. Finally, the model is used to study the impact of rental subsidies and help-to-buy schemes on rational housing bubbles. Rental subsidies are found to contribute to the control of housing bubbles, whereas help-to-buy schemes make the economy more bubble-prone.
Keywords: housing bubbles, housing booms and busts, preference for housing services, expenditure shares on housing services, rental and purchase subsidies, OLG models. JEL Classifications: E32, E44, E52, E58.
“Preference for Housing Preferences and House Price Bubble Ocurrence. Evidence from a Macro-Experiment" (JMP Companion Paper) with Chistina Rott and Giovanni Giusti
Large house price bubbles can be devastating for the real economy. Therefore, understanding the conditions under which large house price bubbles occur is fundamental. We shed new light on this issue in a laboratory setting. We find that endowing subjects with a lower preference for housing services creates larger house price bubbles. This is in line with the theoretical model mechanism proposed by Huber (2016). The experimental result also speaks to the empirical cross-country regularities found in Huber (2016b): Countries with a lower expenditure shares on housing services in total consumption are more prone to large house price bubbles. This paper also contributes to the literature on experimental asset markets more generally. We do not only implement a market for the traded asset but also a market for the dividend of the traded asset. In addition, this paper provides novel design features for bringing OLG models to the laboratory.
Keywords: Housing Markets, Experimental Asset Markets, Housing Bubbles, OLG models. JEL Classifications: E00, C91, G10, G12
"Cross Country Differences in Homeownership Rates. A Cultural Phenomenon?"(JMP Companion Paper) with Tobias Schmidt
Cross-country differences in homeownership rates are large and very persistent over time, ranging between 44% in Switzerland to 83% in Spain. In this project we test the hypothesis that these cross-country differences are driven by cultural tastes. To isolate the effect of culture from the effects of institutions and purely economic factors, we investigate the ownership attitudes of 2nd generation immigrants in the United States. We find robust evidence that cross-country differences in cultural preferences are an important explanatory factor for the observed persistent differences in home-ownership rates across countries.
Keywords: Housing Markets, Homeownership Rates, Cross-Country Heterogeneity, Cultural Transmission. JEL Classifications: E00, R21, R23, J15, O18, Z10
"Sectoral Risk Weights and Macroprudential Policy" joint with Alexander Hodbod and Konstantin Vasilev
This paper analyses bank capital requirements in a general equilibrium model by evaluating the implications of different designs of such requirements in terms of their impact on the tendency of banks to amplify the business cycle. Three capital frameworks are tested: a risk sensitive Internal Ratings-Based (IRB) approach, a risk insensitive leverage ratio approach, and an alternative macroprudential ap- proach which sets risk-weights in response to sectoral measures of leverage. The different methods are compared in a crisis scenario, where the crisis originates in the housing sector, moves on to the banking sector and then infects the wider real economy. We investigate both boom and bust phases of the crisis by simulating an unrealized news shock that leads to a gradual build up and rapid crash in the economy. Our results suggest that the IRB approach creates procyclicality in regulatory capital requirements and thereby works to amplify both boom and bust phases of the financial cycle. On the other hand, our proposed macroprudential approach to setting risk-weights leads to counter-cyclicality in regulatory capital requirements and thereby attenuates the financial cycle.
Keywords: macroprudential policy, risk weighted assets, sectoral and countercyclical capital requirements, baselestablished internal ratings-based (IRB) approach, DSGE models. JEL Classifications: C68, E44, E58, E61.
“Housing Booms and Busts - Convergence and Divergence in OECD Countries”
This paper provide a comprehensive empirical characterization of housing cycles using a large database covering 18 industrialized countries over the period 1970:1-2013:4. The interactions between homeownership rates, expenditure shares for housing services, real estate specific credit variables and house price fluctuations are investigated. Four novel stylized facts are identified across countries: homeownership rates are (1) highly negatively correlated with the expenditure shares for housing services, highly positively correlated with (2) the frequency and (3) the intensity, but uncorrelated with (4) the amplitude of independent housing booms and boom-bust cycles. By contrast, real estate specific credit variables cannot explain cross-country differences in housing cycles. These results call for a better understanding of the interactions between homeownership rates, expenditure shares for housing services and house price fluctuations.
Keywords: Housing Markets, Housing Booms and Busts, Homeownership Rates, Expenditure Shares for Housing Services, Cross-Country Heterogeneity. JEL Classifications: E00, E31.
Research in Progress
"Biased Expectations and Skill Mismatch" with Angela Fiedler
A huge share of unemployment is due to skill mismatch: unfilled vacancies and unemployed workers co-exist, because the skill sets do not match. Moreover, mismatch unemployment features similar cyclicality and persistence like the aggregate unemployment rate (Barnichon and Figura (2013), Herz and Van Rens (2015), Sahin et al. (2014)). Understanding the sources of mismatch is therefore of key importance for policies targeted at lowering the unemployment rate at the structural level and dampening cyclical upswings. Our project will address this topic from three angles: a theoretical search model with different types of expectations formation, a laboratory experiment, as well as empirical data analysis. One part of mismatch is unavoidable, resulting from unpredictable shifts in labor demand due to phenomena as structural change, new product innovations, or technological progress rendering specific sets of skills obsolete. Another part of mismatch, however, might result from agents’ limited capacity to generate rational forecasts of future market tightness, when deciding which occupation they want to train for. This type of mismatch, which we call biased expectations mismatch, may occur even in the absence of above mentioned phenomena, i.e. when labor demand across sectors is fixed. Understanding the possible existence and persistence of biased expectations mismatch is of key importance. This share of total mismatch could relatively easily be addressed by appropriate counselling of unemployed youth, seeking apprenticeships or deciding which university track to undertake. Students’ expectations might be biased towards “what the market needs”, holding implicitly a purely myopic view of the labor market, which may have fatal consequences for resulting unemployment rates.
"Relative versus Absolute Goal Setting" with Jordi Brandts and Christina Rott
This paper studies the effects of goal-setting on performance, entry into competition, and efficiency with a special emphasis on gender issues. In a laboratory experiment, we compare the effects of relative versus absolute goal setting both in competitive and non- competitive environments. A relative goal refers to a performance rank within a group while an absolute goal refers to a particular level of performance. It would be interesting to see whether, performance is systematically different depending on the type of goal- setting (relative versus absolute) and second, whether men and women react differently. This study could lead to a number of follow-up papers. For instance, does the effect of goal setting differ for different types of tasks, e.g., cognitive, creative and concentration tasks? Does it make a difference if the goal setting is private versus public information? This paper could also lead to a follow-up paper with recommended goal setting by an advisor or manager, see for instance Corgnet et al (2015). This is an important topic for managers who want to incentivize their employees such that overall performance is maximized. Timeline: First sessions to be run in January.
"Land Taxes and Housing Prices" with Angela Fiedler
We are analyzing the impact of land taxation in an Overlapping Generations (OLG) framework in the spirit of Blanchard (1985) and Yaari (1965), Benhabib et al. (2016). Theoretically, we are interested in the impact of land taxes on the stability properties of the dynamic system. Since OLG models typically feature multiple equilibria, changing the price of an asset which is in fixed supply may change equilibrium paths. From a policy perspective, land taxes are attractive, because land is in fixed supply, rendering land taxes non-distortionary. However, land taxes may have strong distributional con- sequences. We plan to analyze the distributional consequences of land taxes, estimating the model with micro data from the Eurosystem’s Household Finance and Consumption Survey (HFCS).
"Homeownership, Preference for Housing Services, and House Price Bubbles" (Extension to current JMP)
I extend my overlapping generation model with housing by introducing heterogeneous agents. This allows me to analyse and link the observed cross-country heterogeneity in homeownership rates, expenditure shares for housing services and house price bubble occurrence. Countries with a larger expenditure share on housing services are characterised with lower homeownership rates and experienced significantly less housing bubbles between 1970 - 2014. I plan to introduce nominal rigidities to analyse the theoretical impact of monetary and macro-prudential policies (LTV) and it’s combination on house price fluctuations and bubble occurrence.
Keywords: housing bubbles, homeownership, preference for housing services, expenditure shares on housing services, cross-country heterogeneity. JEL Classifications: E32, E44, E52, E58