Browsing by Subject "D52"

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  • Haavio, Markus; Kauppi, Heikki (2009)
    Bank of Finland Research Discussion Papers 14/2009
    Empirical evidence suggests that local jurisdictions are internally more heterogeneous than standard sorting models predict. We develop a dynamic multiregion model, with fluctuating regional house prices, where an owner-occupying household's location choice depends on its current wealth and its current 'match' and involves both consumption and investment considerations. The relative weights of the consumption and investment motives in the location choice determine the equilibrium pattern of residential sorting, with a strong investment (consumption) motive implying sorting according to match (wealth). The model predicts a negative relation between size of house price fluctuations and residential sorting in the match dimension. Also movers should be more sorted than stayers. These predictions are consistent with evidence from US metropolitan areas when income, age and education are used as proxies for the match. Keywords: residential sorting, house prices, incomplete markets, owneroccupation, household mobility JEL classification numbers: D31, D52, R13, R21, R23
  • Haavio, Markus; Kauppi, Heikki (2011)
    Bank of Finland Research Discussion Papers 24/2011
    We develop a dynamic multi-region model, with fluctuating regional house prices, where an owner-occupied household´s location choice depends on its current wealth and its current type and involves both consumption and investment considerations. The relative strength of the consumption motive and the investment motive in the location choice determines the equilibrium pattern of residential sorting, with a strong investment (consumption) motive implying sorting according to the type (wealth). The model predicts a negative relation between the size of house price fluctuations and the degree of residential sorting in the type dimension. Also, movers should be more sorted than stayers in the type dimension. These predictions are consistent with evidence from US metropolitan areas when income, education and age are used as proxies for household type. Keywords: Residential sorting, House prices, Consumption motive, Investment motive, Incomplete markets, Household mobility JEL Classification: D52, G11, R13, R21, R23
  • Filardo, Andrew J.; Siklos, Pierre L. (2013)
    BOFIT Discussion Papers 5/2013
    Published in Emerging Markets Finance and Trade, Volume 52, Issue 2, 2016: 364-381.
    This paper examines past evidence of prolonged periods of reserve accumulation in Asian emerging market economies and the direct and indirect implications for monetary stability through the potential impact of such episodes on financial stability. The empirical research focuses on identifying periods of prolonged interventions and correlations with key macro-financial aggregates. Related changes in central bank balance sheets are also examined, especially in periods when the interventions are linked to strong capital inflows. In particular, we consider whether changes in the central bank's balance sheet from prolonged intervention lead to spillovers to the balance sheet of the private sector. We explore the possible forms of the spillovers and the consequences on asset prices (e.g., housing prices, equity prices, the growth in domestic credit). Policy implications are drawn. Finally, we propose a new indicator of reserves adequacy and excessive foreign exchange reserves accumulation based on a factor model. Two broad conclusions emerge from the stylized facts and the econometric evidence. First, the best protection against costly reserves accumulation is a more flexible exchange rate. Second, the necessity to accumulate reserves as a bulwark against goods price inflation is misplaced. Instead, there is a strong link between asset price movements and the likelihood of accumulating foreign exchange reserves that are costly. Keywords: foreign exchange reserves accumulation, monetary and financial stability JEL Classification system: F41, F32, E44, D52