Models on the optimal design of monetary policy typically rely on a social welfare loss function defined over inflation and unemployment. Our estimates of such a function use measures of two different dimensions of well-being that have been distinguished by recent research. The first is Cantril’s ‘ladder-of-life’ question. The second captures the emotional quality of everyday experiences. Our Gallup World Poll sample includes one million people in 138 nations over 12 years. Unemployment and inflation reduce well-being, although the ratio of the size of the effect varies dramatically between 2 and 4.6, depending upon which dimension of well-being is chosen.
This paper examines if there are value and momentum effects in the New Zealand housing market across different regions. It is found that the short-term momentum effect exists with the winner regions in the past year outperforming the loser regions in the following year by 2.06%, mainly from capital gains, after adjusting for the market risk. The house returns exhibit long-term reversal with the winner regions in the last six years underperforming the loser regions in each of the next eight years due to lower capital gains. A value effect is present with regions with high rent-price ratios outperforming those with low rent-price ratios in each of the next seven years due to persistent higher rental yields. However, both the reversal effect and value effect can be explained by the market risk.
Many studies have concluded that the effects of oil price shocks have diminished since the mid-1980s. This paper revisits the evidence in Blanchard and Galí (2010). I show that the apparent instability in the oil price-macroeconomy relationship they find can be accounted for by the endogeneity of oil price changes and the lower energy share in consumption in recent decades. When these two factors are taken into account, the effects of oil price shocks on real economic activity appear to be stable over time. Nevertheless, the impact of oil prices on inflation has noticeably weakened.
The Covid-19 pandemic has created tremendous downward pressure on economic activity and revived interest in forecasting economic growth during severe downturns. However, most dynamic factor models used to forecast GDP growth include only domestic data. We construct a large data set of 77 countries representing over 90 percent of global GDP and show that including cross-country data helps produce more accurate forecasts of US GDP growth during economic downturns, but is less helpful in normal times. We provide explanations why this is the case.
In 2011, Thailand experienced its worst flood ever. Using repeated waves of the Thai Household Socio-Economic Survey, we analyze the flood's economic impacts. In 2012, households answered a set of questions on the extent of flooding they experienced. We use this self-identified flood exposure and external exposure indicators from satellite images to identify both households that were directly affected and those that were not directly flooded but their communities were (the spillovers). We measure the direct and indirect impacts of the disaster on income, expenditures, assets, and debt and savings levels for spillover households. We also analyze the flood's impacts across different socioeconomic groups.
