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Empirical studies have estimated a large range of consumption responses to changes in housing prices. Using a quasi-experiment, we estimate a shock of –19.4 percent to single-family house prices in the area surrounding an airport in Stockholm after its operations were unexpectedly continued as a result of political bargaining behind closed doors. Using a household data set with information on the locations of primary residences relative to the airport, we find a short-run elasticity with respect to new car purchases of 0.28, corresponding to a one-year marginal propensity for expenditure on cars (car MPX) of 0.09 cents per dollar lost in housing wealth. Households with high loan-to-value ratios and small bank deposits respond the most. A quantitative model aligns with our empirical findings but also suggests that the car MPX could be 0.31 cents when used cars are included; of this, 73 percent is explained by a collateral channel. When nondurables are accounted for, the total marginal propensity to spend is 2.1 cents. In the case of an absolute fall in housing prices, the total response is four times greater.
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Why are many workers reluctant to leave places in economic decline? This paper explores the role of housing in inter-labor market area (LMA) migration following a regional economic shock. I study the migration response of workers in the oil-exporting region of Stavanger, Norway, following the 2014 global oil price plunge which resulted in a persistent reduction in the region’s labor demand and home prices. Leveraging administrative data, I empirically document an increase in the leaving rate of renters and homeowners with less housing wealth, in contrast to a decrease among homeowners with more housing wealth. The richness of the data allows me to control for potential confounding factors and selection into housing tenure. To explain my findings, I employ a life-cycle model with endogenous home prices, and location, housing, and saving choices that replicate the reduced-form results. It shows that the adverse shock to housing wealth reduces homeowners’ value of leaving which reduces their leaving rate. For homeowners with the most housing wealth, the net effect is a reduction in the leaving rate. The model also shows that moving subsidies that are unconditional on worker characteristics influence the leaving rate of renters more than homeowners because renters are on average more liquidity-constrained. I also provide additional empirical results on the changes in the inflow to Stavanger: while the young and high-income workers avoid the region, renters and older workers of lower income and with relatives in the region arrive at the same or a higher rate than before. I.e., the population composition does not only change due to who leaves but also who arrives.
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Following the oil price plunge of 2014, local income and home prices fell in the oil-intense region of Stavanger on the Norwegian west coast. We study the consumption of government employees across Norway and compare their change in expenditures in response to the fall in home prices. We argue that government workers experience the same insulation from local oil revenue and that differences in changes in expenditures are due to changes to housing wealth. Using the near-universe of digital payments at a high frequency and with information on the type of store, we can decompose the heterogeneus change in expenditures across consumption categories and compute the partial-equilibrium impact on the local economy by accounting for the categories differential import shares.
In countries with wealth and tax registries, household expenditures can be imputed using the budget constraint method (see, for example, Browning and Leth-Sorensen, 2003). However, during certain life events such as household splits and mergers, housing purchases, or other large financial transactions, or for specific types of workers such as business owners, there is a risk of measurement errors that are not well understood. In this study, we compare the budget constraint method to another source of administrative data: digital payments and transfers in Norway. The goal is to compare the two measures of household expenditures and see when they agree across households and identify situations when the methodologies differ.
Using the universe of Swedish car transactions matched to rich administrative data, we study the heterogeneous monetary policy transmission to households’ car purchases.
The cyclical nature of durable goods in general, and cars in particular, make them a natural focus for economic policies attempting to stabilize household expenditure and ultimately aggregate demand. Using the universe of car transactions in Sweden during 1999–2019, matched to administrative data with information on the buyers and sellers, this paper documents new facts about the effects of monetary policy on car expenditure. Following a monetary expansion, we find that the aggregate rise in car expenditures is driven mostly by the extensive margin. The rise in the extensive margin lasts for three years and is followed by three years of below-trend car purchases, which reduces the cumulative response by 49 percent relative to its peak. Further, the top income-quintile accounts for 74 percent of the car-spending response, driven by purchases of new cars.
We study whether housing transactions are an important monetary policy transmission channel. Using Swedish administrative data that combine household registers with universe-level information on housing and car transactions, we document three results. First, contractionary monetary policy shocks reduce both durable expenditure and housing-market activity: a 25 basis point tightening lowers durable spending by about 5% after eight quarters, with cars and home-related goods accounting for the bulk of the durable response, and reduces housing transactions by about 4% within a year. Second, at the household level, housing transactions coincide with large increases in durable spending. Third, a decomposition of aggregate impulse responses implies that the decline in housing transactions accounts for about 10–15% of the total fall in durable expenditure after a monetary tightening. The evidence suggests that housing turnover is a quantitatively meaningful propagation margin within the housing channel of monetary policy.
Does lowering corporate bond rates by QE in itself stimulate firm investment and other real outcomes? By an event-time approach with TRACE data, we try to disentangle channels of large-scale asset purchases to the firm side of the U.S. economy.
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In my master thesis, I study the efficiency of the symplectic Euler method with an Ornstein-Uhlenbeck step in estimating parameters of physical systems that require long-time integration.