News and policy foresight in a macro-finance model of the US

We study the effects of information shocks on macroeconomic and term structure dynamics in an estimated medium-scale DSGE model for the US economy. We consider news about total factor productivity and investment-specific technology, as well as foresight about monetary policy. Our empirical investigation confirms the findings of previous studies on the limited role played by productivity news in this class of models. In contrast, we uncover a non-trivial role for investment-specific news and anticipated monetary policy shocks not only in the historical and variance decomposition of real economic variables but also for the overall dynamic behavior of the term structure of interest rates. We also document substantial qualitative differences in the dynamic responses of the macroeconomy and the bond yield term structure to anticipated and surprise structural and policy innovations. JEL Classification: E32, E43, E52DSGE model, news, Policy Foresight, Term structure

Inflation perceptions and expectations in the euro area: the role of news

The aim of this study is to assess empirically to what extent the degree of heterogeneity of consumers’ inflation perceptions and expectations is driven by the flow of information related to current and future price developments in the euro area. We conduct the analysis both on an aggregate level for the euro area as well as for a set of countries using panel techniques. We find that the degree to which consumers’ expectations are discordant is negatively related to news intensity. Moreover, the results suggest that the absolute bias in expectations decreases as news become more intense and this effect has become more pronounced since the introduction of the common currency. JEL Classification: D12, D84, E31euro area, heterogeneity, inflation expectations, news, survey data

Long-Run Discounting: Evidence from the UK Leasehold Valuation Tribunal

The United Kingdom's Leasehold Valuation Tribunal hears extension and enfranchisement cases between landlords (freeholders) and tenants (leaseholders). In these cases, the two parties argue about the terms of housing lease extensions of up to 90 years in length, and about enfranchisements to convert leasehold contracts of specific durations to perpetual ownership freeholds. The widely-followed decisions of the leasehold valuation tribunal provide a unique insight into household-level variation in expectations of long-run discount rates and cash-flows, and set bounds on the prices that market participants may be willing to pay for housing over long periods of time. We use the record of decisions since 1995 to extract information about long-run cash-flow and discount rate expectations in this unique setting, which requires no estimation, but has real stakes for the participants in these negotiations. We find evidence that the discount rate associated with these decisions causes values of properties discounted for long periods (above 90 years) to be close to zero

International Mortgage Markets: Products and Institutions

Economic

International Comparative Household Finance *

Abstract This paper reviews the literature on international comparative household finance. The paper presents summary statistics on household balance sheets for 13 developed countries, and uses these statistics to discuss common features and contrasts across countries. The paper then discusses retirement savings, investments in risky assets, unsecured debt, and mortgages. * We thank the Sloan Foundation for financial support. We are grateful to Vimal Balasubramaniam, Daniel Fang, Wen Zhe Lim, Pranath Sisodiya, and Kevin Wang for able and dedicated research assistance

What Calls to ARMs? International Evidence on Interest Rates and the Choice of Adjustable-Rate Mortgages

The relative popularity of adjustable-rate mortgages (ARMs) and Öxed-rate mortgages (FRMs) varies considerably both across countries and over time. We ask how movements in current and expected future interest rates a§ect the share of ARMs in total mortgage issuance. Using a nine-country panel and instrumental variables methods, we present evidence that near-term (one-year) rational expectations of future movements in ARM rates do a§ect mortgage choice, particularly in more recent data since 2001. However longer-term (three-year) rational forecasts of ARM rates have a relatively weak e§ect, and the current spread between FRM and ARM rates also matters, suggesting that households are concerned with current interest costs as well as with lifetime cost minimization. These conclusions are robust to alternative (adaptive and survey-based) models of household expectations.Economic

What Calls to ARMs? International Evidence on Interest Rates and the Choice of Adjustable-Rate Mortgages

We gratefully acknowledge the Sloan Foundation for financial support. We thank Gene Amromin, Ralph Koijen, Stijn van Nieuwerburgh, and participants at the European Conference on Household Finance for many useful comments, and Joshua Abel and Gaurav Kankanhalli for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications