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Ebook Rapid Evidence Assessment of the economic and social consequences of worsening housing affordability

Submitted by wulan on Tue, 12/08/2009 - 01:41

In June 2008, the National Housing and Planning Advice Unit (NHPAU) commissioned the Centre for Housing Policy at the University of York to undertake a Rapid Evidence Assessment (REA) of the ‘Economic and Social Consequences of Worsening Housing Affordability’.

The cost of market housing has attracted considerable political and media attention over recent years with house prices rising twice as fast as earnings since 1990, producing severe difficulties for first-time buyers in many areas (Barker, 2004). However, it is now clear that 2007 was the peak of the housing market cycle and house prices across England have fallen by four per cent over the past year (CLG, Table 508), and a variety of analysts forecast further falls in 2009.

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Ebook Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?

Submitted by wulan on Tue, 02/02/2010 - 07:21

Underdeveloped countries often have underdeveloped financial markets. This can lead to an inefficient allocation of capital, in turn translating into low productivity and per-capita income. But available theories of this mechanism often ignore the effects of financial frictions on the accumulation of capital and wealth. Even if an entrepreneur is not able to acquire capital in the market, he might just accumulate it out of his own savings.

The implications of such effects are not well understood. To explore them, this paper proposes a tractable dynamic theory featuring heterogeneous entrepreneurs who are subject to borrowing constraints. It then applies the theory to quantify productivity losses from financial frictions, using plant-level panel data from two emerging market economies.

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Ebook The Procyclical Leverage Effect of Collateral Value on Bank Loans — Evidence from the Transaction Data of Taiwan

Submitted by puput on Mon, 11/02/2009 - 03:19

In the financial contract literature collateral has been identified as serving as a screening device and sorting mechanism (Bester, 1985; Berger and Udell, 1990). The practical significance of collateral is recognized in recent studies on financial contracts in securing repayments, which put collateral as a primarily important factor in determining external financing and investment (Bernanke and Gertler, 1989; Kiyotaki and Moore, 1997; Chen, 2001a). In particular, Kiyotaki and Moore (1997) investigate exogenous shocks’ transmission mechanism of collateral channel through the interaction of credit constraints and the value of collateralized assets. Fluctuations in asset prices change the value of the collateral and affect the firm’s ability to obtain external financing, thus magnifying business fluctuations. Chen (2001a) extends the connection of collateral value and bank loans by taking banks’ financial characteristics into consideration, emphasizing the role of banks in affecting the amount of collateral-secured loans. Their models hence provide a theoretical link between fluctuations of collateral value, firms’ credit constraint, and the capacity of bank lending. Their models further imply that the leverage per dollar value of collateral is positively correlated with the (expected) value of the collateral.

The significance of firms’ collateral value on bank lending has been empirically examined in the literature, and most of the analyses are based on macro data. For instance, Kiyotaki and West (1996) and Ogawa et al. (1996) use macro time-series data to explain the investment behavior of Japanese firms in the 1990s and find that land value significantly affects investment behavior. Among those few that apply micro-data in their analysis, Ogawa and Suzuki (1998, 2000) use Japanese firm-level data and find that Japanese land value has a significant effect on the degree of borrowing constraint. These works, however, do not fully control for bank heterogeneity which can be important in explaining observed lending behavior and the collateral requirement.

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