Asymmetric Information Issue No. 67
Contents
The contents of New Zealand Economic Papers, Volume 54, Issue 1, 2020 (available online or by subscription):
Dear economics community,
Due to the ongoing and worsening COVID-19 situation, the NZAE Council has moved to cancel the 2020 Conference.
This decision was not taken lightly and we apologise for any inconvenience caused.
Please contact our conference managers On Cue with any queries. https://www.nzaeconference.co.nz/
Be safe, be kind
Regards
Peter Tait
President of the New Zealand Association of Economists
Asymmetric Information Issue No. 66
Contents
First Call for Papers:
61st New Zealand Association of Economists Annual Conference
To be held at Victoria University of Wellington, Wellington Tuesday 30 June to Thursday 2nd July 2020
NZAE PhD Student Workshop, 2020
To be held at Motu Economic & Public Policy Research office, Wellington Monday 29 June 2020
Stata Prize for Excellence in Graphics Communication
one of many prizes to be awarded at the Conference
Feel free to distribute the attached flyer to colleagues who may be interested in attending the Conference and or joining the Association. Further information can be found within the attached flyer and on the Conference website https://www.nzaeconference.co.nz/
Please email all conference enquiries to Ian Duncan or Jenna Collett at On-Cue or NZAE
Submission deadline now: 30 April 2020
Central banks are facing a new and uncertain landscape. The reliance on one policy objective – inflation targeting – and one tool – interest rates – has proven to be inadequate. Despite record-low interest rates over many years and massive liquidity injections by central banks through asset purchase programs, inflation has not picked up as expected in many developed economies. Central banks’ operational independence has been severely questioned. So where do central banks go from here?
This Special Issue of New Zealand Economic Papers will be devoted to addressing these questions using evidence-based economic analysis. We welcome research on all aspects of central banking, including its practices, challenges and the future. We welcome both national and international submissions.
See attached for more detail NZEP Call for Papers Jan2020
Treasury in Wellington hosts Kevin Fox, Professor and Director of Centre for Applied Economic Research, UNSW Business School, Sydney 4 February 2020, discussing “The Digital Economy, Welfare and Productivity Growth“.
Massey University in Palmerston North hosts local Senior Lecturer Kim Hang Pham Do 5 February 2020, discussing “Does tourism improve the community’s well-being in Marine Protected Areas?“.
Motu in Wellington hosts Kevin Rennert, Fellow and Director, Social Cost of Carbon Initiative, Resources for the Future, United States 13 February 2020, discussing “Improving Estimates of the Social Cost of Carbon, and the Status of State and Federal Climate Policy in the United States“.
Otherwise check the web pages of each institution, listed here, in early 2020 for updates.
See dedicated conference website for more detail released nearer to the event.
Title: 61st NZAE Conference 2020
Location: Rutherford House, Victoria University of Wellington
Description: Annual 3-day NZAE Conference
Start Date: Tues June 30, 2020
Start Time: 08:00
End Date: Thur July 2, 2020
End Time: 13:30
2020 Conference important dates:
PhD Workshop: Tuesday, 29th June; venue TBD
2020 Conference keynotes:
The contents of New Zealand Economic Papers, Volume 53, Issue 3, 2019 (available online or by subscription):
Asymmetric Information Issue No. 65
Contents
The contents of New Zealand Economic Papers, Volume 53, Issue 2, 2019 (available online or by subscription):
Copies of papers made available by the authors for NZAE Conference 2019 are available at https://www.nzae.org.nz/events/nzae-conference-2019/2019-conference-papers/
Photos are available at https://www.nzae.org.nz/events/nzae-conference-2019/2019-conference-photos/
Stephen Jenkins is Professor of Economic and Social Policy at the London School of Economics. He is one of the world’s leading scholars in the economics of inequality and poverty. He has contributed significantly to applied econometrics and in doing so, his work has addressed topics such as the rise in top incomes and their contribution to recent increases in inequality, how to measure poverty persistence and assess which factors trigger exits from a poverty spell. Stephen has also researched related topics such as labour market participation and the tax and benefit system. An honours graduate from the University of Otago, Stephen held a junior lectureship at Massey University. He then obtained his doctorate from the University of York, UK on Inequality and Intergenerational Continuities in Lifetime Income (1983) which was supervised by Tony Atkinson. Thereafter followed a range of university appointments at the Universities of Bath, Essex (as Professor of Economics at the Institute for Social and Economic Research (ISER), and ISER Director) and Swansea (Professor of Applied Economics). In addition to this, Stephen has held a number of notable positions that includes Editor-in-Chief of the Journal of Economic Inequality (2014–17), President of the International Association for Research on Income and Wealth (2006–8) and of the European Society for Population Economics (1998) as well as the R.I. Downing Fellow, University of Melbourne in 2009. Stephen has maintained close links with researchers in New Zealand. He has served as a consultant to the New Zealand Treasury in 1994, and took part in a Treasury-organised conference in 2016. An examination of his very impressive list of publications to date underlines both the quality and impact of his outstanding research. Stephen has collaborated extensively not only with Tony Atkinson, but he has also written with other leading scholars in his field such as Andrea Brandolini and François Bourguignon. His work has appeared in a long list of leading Economics journals that includes Economica, Economic Journal, Health Economics, Journal of Population Economics, Review of Economics and Statistics, Review of Income and Wealth and many more. Stephen has also published several influential books including Changing Fortunes: Income Mobility and Poverty Dynamics in Britain (2011) and The Great Recession and the Distribution of Household Income (co-edited with Brandolini, Micklewright and Nolan in 2013). Stephen’s considerable influence on colleagues’ thinking is underlined by the extent to which his work has been cited. According to Google Scholar, his research receives over a thousand citations a year. He has almost fifty publications (journal articles, books and book chapters) that have been cited at least hundred times. If one considers the Research Papers in Economics (RePEc) worldwide citation rankings for almost 60000 authors, Stephen comfortably sits inside the top 0.5 per cent. The New Zealand Association of Economists is delighted to bestow upon Stephen Jenkins a Distinguished Fellow award.
References
Jenkins, S., Changing Fortunes: Income Mobility and Poverty Dynamics in Britain, Oxford University Press, Oxford, 2011.
Jenkins S., Brandolini A., Micklewright J. and B. Nolan (eds.), The Great Recession and the Distribution of Household Income, Oxford University Press, Oxford, 2013.
Caroline was a Council member of the NZAE from 1997 to 2006 and was President of the Association from 2001 to 2003. During her time as President and then Past President, the Association instituted its Distinguished Fellow awards which has brought NZAE and its members into closer contact with many of New Zealand top economists, based both in New Zealand and overseas. Her service to the wider economics profession has also been admirable. Caroline is the long-standing Director of the Agribusiness and Economics Research Unit at Lincoln University. Serving the broader research field, Caroline was appointed as a Royal Society Te Apārangi Councillor, a position she held from 2015 to 2018. She is a Director of Landcare Research (Manaaki Whenua) and, in 2019, was one of the inaugural appointees to the Reserve Bank of New Zealand’s Monetary Policy Committee. At an international level, Caroline serves the economics profession by holding the Agricultural Economics Society Presidency for 2019-2020. Caroline’s service both to the economics profession and more broadly has been recognised with the award of NZIER Economist of the Year in 2007, and by becoming an Officer of the NZ Order of Merit in 2009. The Association is delighted to add to these recognitions of service by awarding Caroline Saunders with life membership of the New Zealand Association of Economists.
Congratulations to James Graham, who was awarded the 2019 A. R. Bergstrom Prize in Econometrics for his paper “House Prices and Consumption: A New Instrumental Variables Approach”. The Bergstrom Prize can be awarded every two years and aims to reward the achievement of excellence in econometrics, as evidenced by a research paper in any area of econometrics.
Fluctuations in house prices are thought to have a significant impact on the macroeconomy, especially through their effect on consumption expenditures. The household balance sheet channel is a commonly cited explanation for this effect, whereby movements in house prices induce wealth effects and changes in the value of collateral. The primary difficulty in trying to identify these effects empirically is that house prices are endogenous equilibrium objects. Instrumental variables strategies are one way to isolate potentially exogenous variation in such prices.
James’ paper assesses the response of household consumption to house prices using a new instrumental variable strategy, which follows the literature on Bartik instruments. These are often referred to as “shift-share”’ instruments, since they typically consist of some aggregate shock that differentially affects locations according to the share of economic activity exposed to that shock.
In the paper, the instrument for local house price growth consists of the local share of houses possessing particular physical characteristics, which is then interacted with regional growth in the marginal prices of those characteristics. The characteristics include features that capture the overall quality of a house, such as its age, number of bedrooms, or number of bathrooms. The intuition for the effectiveness of the instrument is that the more the housing stock in each location is concentrated in particular characteristics, the more exposed that location will be to shocks to the relative prices of those characteristics. For example, if San Francisco was composed mostly of two-bedroom houses built prior to the 1960s, while Las Vegas has mostly four-bedroom houses built in the early 2000s, then a general increase in the price of larger and newer houses would result in relatively faster house price appreciation in Las Vegas.
To conduct the empirical analysis, James uses large micro-data sets on house prices and household consumption. The house price instrument is constructed using data on millions of individual housing transactions from across the US. Because this data contains information on geography, house characteristics, and house prices, it can be used to construct the composition of house characteristics in each location and to run the hedonic house price regressions that are used to estimate the marginal prices of the house characteristics. Household consumption expenditures are taken from a large panel data set which, among other things, contains information on the location of each household. Each household can then be linked to local house price changes in order to estimate the effect of these prices on their consumption behavior.
James reports IV-estimated average consumption elasticities with respect to house prices in the range of 0.1 to 0.15. These estimates correspond to marginal propensities to consume out of housing wealth of approximately 1.2 to 1.8 cents in the dollar, in line with previous estimates in the literature. Another important contribution of the paper is to show that, when estimating consumption elasticities in a panel data setting, the Bartik instrument performs much better than popular alternative instruments in the literature (e.g. local housing supply elasticities). For instance, the instrument provides significant time-series variation in house prices, while other instruments are mostly only useful in the cross-section.
In their assessment, the adjudicators Professors David Fielding, Alfred Haug, and Dorian Owen noted that James’ paper “is an excellent piece of empirical research. It is well crafted with great attention to detail, using new data on millions of individual housing transactions across the US. The author developed a novel instrument for house prices in order to overcome endogeneity problems when estimating the relationship between household consumption and house prices. The robustness of the empirical findings is convincingly demonstrated.”
Congratulations to the following recipients of prizes associated with NZAE Conference 2019. More detail on each prize is available at https://nzae.org.nz/prizes/
| David Teece Prize in Industrial Organisation and Firm Behaviour | Geoffrey Brooke & Lydia Cheung |
| New Zealand Economic Policy Prize | John Creedy, Nazila Alinaghi & Norman Gemmell |
| NZIER Poster prize – open | Sherry Li |
| NZIER Poster prize – student | Sherry Li |
| People’s Choice Poster | Sherry Li |
| Jan Whitwell Doctoral | Hanna Habibi |
| Jan Whitwell Bachelors / Masters | Livvy Mitchell |
| Seamus Hogan Research Prize | Bronwyn Bruce-Brand |
| Stata Prize for Excellence in Graphics Communications | Geoff Cooper & Kabira Namit |
| Stats NZ Prize | Andrea Menclova & Asaad Ali |
CGE modelling offers a flexible and robust framework to quantify and explain how the economy evolves in response to changes in the economic environment. Changes in population size and characteristics, investment spending and capital stocks, government spending and taxation policies and changes in the foreign sector are just some of the “policy shocks” that can be investigated. CGE modelling is a globally popular analytical tool, recognised as the “gold standard” for informing policy formulation and analysis through scenario simulation.
CGE stands for computable general equilibrium – the most basic form of a CGE model is built on neoclassical microfoundations and calibrated using data for the economic area(s) of interest (e.g. national accounts data for a single country model). The primary advantage of CGE analysis over more traditional and simpler multiplier (input-output) analysis is that CGE models impose supply constraints and therefore relative prices are endogenous and explicitly solved for.
Despite the rich detail and robust underlying theoretical structure of CGE models, their predictive power should not be overstated. Data for many parameters often does not exist and the model is only calibrated (as opposed to estimated) using the data that is available. Thus, while CGE models produce quantitative results, their magnitudes should not be relied upon to the extent that econometrically estimated results can be (i.e. to a certain level of statistical significance).
CGE models are most useful when taking a kind of “differences-in-differences” approach (using the term more loosely than in the usual statistical technique sense) For instance, one might compare the welfare effects on heterogenous households in a region when there is an export boom of a product that is intensively produced in that region under alternative scenarios such as when in-migration of persons in relevant occupational groups (i.e. with relevant skill sets) is allowed or not allowed. The welfare effects across household types could be quite different in each scenario and would indicate the “winners and losers” of the export boom if in-migration was likely (or unregulated). Such conclusions would be more reliable and useful than just quoting quantitative model predictions of increases in regional GDP etc. arising from the export boom.
The NZAE AGM will be held during the 2019 NZAE Conference on Thursday 4th July 2019 at 1.15 pm in Lecture Room RH105, Rutherford House, Victoria University, 23 Lambton Quay, Wellington.
Note: Conference registration is not necessary for an NZAE member to attend the AGM only.
Please refer to page 19 of the 2018 Annual Report for the AGM Agenda.
The Reserve Bank of New Zealand and the International Monetary Fund are hosting a conference on the future of inflation targeting.
Details at RBNZ page
Other seminars and workshops hosted by the RBNZ and other institutions and university departments can be found at https://www.nzae.org.nz/events/general-presentations/
The 2019 conference programme is available at http://nzaeconference.co.nz/programme