Household Risk Management and Optimal Mortgage Choice

Home mortgages are the most significant financial contract for many households. The form of this contract is correspondingly important. This paper studies the choice between fixed-rate (FRM) and adjustable-rate (ARM) mortgages. In an environment with uncertain inflation, nominal FRMs have risky real capital value whereas ARMs have safe capital value. However ARMs can greatly increase the short-term variability of required real interest payments. This is a serious disadvantage of ARMs for households who face borrowing constraints and have only a small buffer stock of financial assets. The paper uses numerical methods to solve a life-cycle model with risky labor income and borrowing constraints, under alternative assumptions about available mortgage contracts. Households with large mortgages, risky labor income, high risk aversion, and a low probability of moving are more likely to prefer nominal FRMs. The paper also considers inflation-indexed FRMs. These mortgages remove the wealth risk of nominal FRMs without incurring the income risk of ARMs, and therefore are a superior vehicle for household risk management. The paper finds that the welfare gains of mortgage indexation can be very large.

Household Risk Management and Optimal Mortgage Choice

A typical household has a home mortgage as its most significant financial contract. The form of this contract is correspondingly important. This paper studies the choice between a fixed-rate (FRM) and an adjustable-rate (ARM) mortgage. In an environment with uncertain inflation, a nominal FRM has risky real capital value whereas an ARM has a stable real capital value. However an ARM can increase the short-term variability of required real interest payments. This is a disadvantage of the ARM for a household that faces borrowing constraints and has only a small buffer stock of financial assets. The paper uses numerical methods to solve a life-cycle model with risky labor income and borrowing constraints, under alternative assumptions about available mortgage contracts. While an ARM is generally an attractive form of mortgage, a household with a large mortgage, risky labor income, high risk aversion, a high cost of default, and a low probability of moving is less likely to prefer an ARM. The paper also considers an inflation-indexed FRM, which removes the wealth risk of the nominal FRM without incurring the income risk of the ARM, and is therefore a superior vehicle for household risk management. The welfare gain from mortgage indexation can be very large.

How Do House Prices Affect Consumption? Evidence From Micro F. Data

Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households’ consumption decisions. Rising house prices may stimulate consumption by increasing households’ perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. It suggests that as the population ages and becomes more concentrated in the old homeowners group, aggregate consumption may become more responsive to house prices. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.

How Do House Prices Affect Consumption? Evidence From Micro Data

Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households' consumption decisions. Rising house prices may stimulate consumption by increasing households' perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.

I Raised My Boy To Be A Soldier

https://digitalcommons.library.umaine.edu/mmb-vp/5290/thumbnail.jp

MAXIMIZING RESOURCE RENT FROM THE WESTERN AND CENTRAL PACIFIC TUNA FISHERIES

Rent generated by the tuna fisheries occurring in the waters of Pacific Islands Nations is estimated for various levels and combinations of purse-seine, pole-and-line, frozen tuna longline, and fresh tuna longline fishing effort, using a multi-species, multi-fleet bioeconomic model. The underlying population model integrates available information on the population dynamics of skipjack, yellowfin, bigeye, and Southern albacore tunas in the Pacific Ocean. The economic model utilizes the most recent data on fishing effort costs for the purse seine, pole-and-line, and longline fleets operating in the western and central Pacific Ocean, along with recent estimates of prices by species, method of capture and market, and estimates of demand elasticities. The results of the model indicate that fishery rent could be increased substantially above the current level by decreasing the size of all fleets, with the possible exception of the tuna longline fleet. The results also suggest that the countries of the region could benefit significantly by changing the level and structure of access fees levied as a percentage of total catch revenue.Resource /Energy Economics and Policy,

Science requirements for a global change technology architecture trade study

Science requirements for a global change technology initiative (GCTI) Architecture Trade Study were established by reviewing and synthesizing results from recent studies. A scientific rationale was adopted and used to identify a comprehensive set of measureables and their priorities. Spatial and temporal requirements for a number of measurement parameters were evaluated based on results from several working group studies. Science requirements were defined using these study results in conjunction with the guidelines for investigating global changes over a time scale of decades to centuries. Requirements are given separately for global studies and regional process studies. For global studies, temporal requirements are for sampling every 1 to 12 hours for atmospheric and radiation parameters and 1 day or more for most earth surface measurements. Therefore, the atmospheric measureables provide the most critical drivers for temporal sampling. Spatial sampling requirements vary from 1 km for land and ocean surface characteristics to 50 km for some atmospheric parameters. Thus, the land and ocean surface parameters have the more significant spatial variations and provide the most challenging spatial sampling requirements

Effects of hydrocarbon spills on the temperature and moisture regimes of Cryosols in the Ross Sea region

Hydrocarbon spills have occurred on Antarctic soils where fuel oils are utilized, moved or stored. We investigated the effects of hydrocarbon spills on soil temperature and moisture regimes by comparing the properties of existing oil contaminated sites with those of nearby, uncontaminated, control sites at Scott Base, the old Marble Point camp, and Bull Pass in the Wright Valley. Hydrocarbon levels were elevated in fuel-contaminated samples. Climate stations were installed at all three locations in both contaminated and control sites. In summer at Scott Base and Marble Point the mean weekly maximum near surface (2 cm and 5 cm depth) soil temperatures were warmer (P<0.05), sometimes by more than 10°C, at the contaminated site than the control sites. At Bull Pass there were no statistically significant differences in near-surface soil temperatures between contaminated and control soils. At the Scott Base and Marble Point sites soil albedo was lower, and hydrophobicity was higher, in the contaminated soils than the controls. The higher temperatures at the Scott Base and Marble Point hydrocarbon contaminated sites are attributed to the decreased surface albedo due to soil surface darkening by hydrocarbons. There were no noteworthy differences in moisture retention between contaminated and control sites