Life-Cycle Housing and Portfolio Choice with Bond Markets

I study optimal housing and portfolio choice under stochastic inflation and real interest rates. Renters allocate financial wealth to stocks and bonds with different maturities. Homeowners also choose the mortgage type. I show that hedge demands and financial constraints vary over an investor's lifetime, giving rise to a pronounced life-cycle pattern in the optimal housing, stock, bond, and mortgage choice. Young homeowners take an adjustable-rate mortgage (ARM) and invest financial wealth predominantly in stocks. Later in the life cycle bonds play an important role, mainly as a hedge against changing real interest rates and house prices. Fairly risk-tolerant homeowners still prefer an ARM, while more risk-averse investors rather choose a combination of an ARM and a fixed-rate mortgage.Portfolio choice; mortgage; housing; term structure of interest rates

Going for Growth; a Theoretical and Policy Framework

This paper introduces scenario planning as a tool to explore plausible developments for SMEs in the Netherlands until 2040. Globalization has resulted in the emergence of an increasingly borderless society with greater unrestricted movement of information, travel, and currency between countries. As policy and technological developments in the past few decades have spurred increases in cross-border trade, investment, and migration, new policy approaches in the economic, political, environmental, and social sphere will be necessary. On the national level, SMEs are acknowledged to play an important role in the economy serving as agent of change by their entrepreneurial activity, being the source of considerable innovative activity, stimulating industry evolution and creating an important share of the newly generated jobs. Entrepreneurship should therefore be promoted, but on a national level, since global development takes places in stages. Government policy, it is believed, can play a considerable role in facilitating entrepreneurship on a national scale. There is however great uncertainty on the scale of future bottlenecks and the economic conditions under which SMEs will need to develop. Scenarios can help map out possible changes and what effect they may have on national welfare.DYNREG

Critical Success Factors for a Knowledge-Based Economy: An Empirical Study into Background Factors of Economic Dynamism

The past decade has shown a rising popularity of the notion of the knowledge-based economy. In Europe this has led to important political paradigms such as the Lisbon Accord and the Barcelona targets, which have become signposts for R&D policy in the EU. The relationship between knowledge and economic growth is often studied in a conceptual and empirical context by addressing correlations between these factors (on the basis of e.g. the new growth theory and endogenous growth theory). This paper takes a complementary, more exploratory route. Starting from the notions of modern knowledge and growth theory, it examines views and attitudes of experts and industrial, R&D or research leaders to identify the critical success factors that are decisive for economic dynamism of a region or country. Knowledge is conceived of as a social capital asset that may reduce or maintain accelerated economic growth. In our study, a sample of 'knowledge experts' is used to identify the relative importance attached by these experts to the various factors that shape the force field of a knowledge-based economy. The results are analyzed using statistical regression methods and common factor analysis. The study is carried out for different types of regions/ countries in the world (the Netherlands, developed regions, developing regions, and semi-developed regions).critical success factors/factor analysis/growth/innovation/knowledge-based economy

Dynamic portfolio and mortgage choice for homeowners

We investigate the impact of owner-occupied housing on financial portfolio and mortgage choice under stochastic inflation and real interest rates. To this end we develop a dynamic framework in which investors can invest in stocks and bonds with different maturities. We use a continuous-time model with CRRA preferences and calibrate the model parameters using data on inflation rates and equity, bond, and house prices. For the case of no short-sale constraints, we derive an implicit solution and identify the main channels through which the housing to total wealth ratio and the horizon affect financial portfolio choice. This solution is used to interpret numerical results that we provide when the investor has short-sale constraints. We also use our framework to investigate optimal mortgage size and type. A moderately risk-averse investor prefers an adjustable-rate mortgage (ARM), while a more risk-averse investor prefers a fixedrate mortgage (FRM). A combination of an ARM and an FRM further improves welfare. Choosing a suboptimal mortgage leads to utility losses up to 6%

Mortgage Timing

The fraction of newly-originated mortgages that are of the adjustable-rate (ARM) versus the fixed-rate (FRM) type exhibits a surprising amount of time variation. A simple utility framework of mortgage choice points to the bond risk premium as theoretical determinant: when the bond risk premium is high, FRM payments are high, making ARMs more attractive. We confirm empirically that the bulk of the time variation in household mortgage choice can be explained by time variation in the bond risk premium. This is true regardless of whether bond risk premia are measured using forecasters' data, a VAR term structure model, or a simple rule-of-thumb based on adaptive expectations. This simple rule-of-thumb moves in lock-step with mortgage choice, thereby lending further credibility to a theory of strategic mortgage timing by households.

Tetragonal zirconia: Wet chemical preparation, mechanical and electrical properties

Yttria-stabilized zirconia powders were prepared in the composition range of 3 to 13 at% yttria. The hydrolysis-gel precipitation technique was used, starting from metal alkoxides or chlorides. In the composition range between 5 and 10 at% yttria, the materials sintered at 1250°C have a fully tetragonal structure. The density was higher than 95% and the grain sizes can be varied between 0.1 and 0.5μm depending on the preparation conditions. The fracture toughness KIC amounts 6 to 11 MPam but is not dependent on the composition. The transformation toughening mechanism and the properties of the tetragonal phase itself play an important role in the increase of KIC compared with cubic materials. The magnitude of the oxygen-ion conductivity value is comparable with that for cubic materials