Archive for December 3rd, 2009

Automatic Stabilizers for real estate sector

December 3, 2009

Adam Posen in his new speech says central banks should not use monetary policy to target asset price booms/bubbles. Instead we need more tools to target the bubbles.

Using monetary policy or interest rates for asset bubbles is like using a hammer to operate a shower. It will only worsen things. What is needed is right tools for a specific problem. He nicely says not everything is a monetary nail  

In a speech at the MPR Monetary Policy and Markets Conference in London today, Adam Posen – an external member of the Bank’s Monetary Policy Committee – discusses how asset price booms might be addressed in the future. He rejects the notion that monetary policy should be used to tackle asset prices, and believes other tools are needed and better suited for the task. In addition to macroprudential policies – such as those outlined in a recent Bank of England discussion paper – Adam Posen suggests there is merit in considering tools that tackle asset prices directly. In particular, he discusses the idea of an automatic stabiliser for housing prices.

What is this auto stabilizer?

He suggests as a complementary policy, changes to real estate taxes and regulation, to provide a counter-cyclical element – automatic stabilisers – to structures already in place in many countries’ housing markets.

Adam Posen stresses that the proposal is “…something modest, without any large implications for tax revenue over the cycle…”. He says: “…it would mean having already existing title fees, capital gains taxes, stamp and transfer taxes, varying over time in line with price developments in the housing market more broadly. …a simple blunt instrument targeted to lean against the wind in real estate prices in an automatic fashion.”

This is a pretty novel idea. He says we need to look more closely at housing bubbles as they create more damage to the economy.

Final thoughts

The bottom-line for monetary policy coming out of the crisis is, if you have a financial problem, use financial policy tools to fix it. That applies to bubbles, which means monetary policy should not be targeting asset prices as well as inflation.” He says: “…the direct role of monetary conditions (and tightening thereof) in the creation of asset price booms is minimal… Financial problems come from something else. Where else? Changes in technology (for equity bubbles) and in financial regulation and supervision (for both equity bubbles and real estate bubbles) are the key drivers. That is the reason for my suggesting a new line of discussion for stabilization policy in addition to the necessary macroprudential proposals for the financial system.”

Excellent stuff as usual from Posen. Loads of food for thought. Full of references and graphs to prove his point.

Matrimony website for people in development sector

December 3, 2009

India Development Blog pointed this website

Website for social workers, development professionals, innovators to search marriage partners 

The website is developed by SynQues Consultancy, a Netherlands based firm which has India offices as well. The about us and other links are not working so we don’t have much idea on whether SynQues alone is responsible or others are as well.

It was pretty amusing at first but a much-needed solution to a big problem emerging in India. It is a useful market-making/market-design tool.

We have many websites catering to the various communities but people also want to marry people in their own fields. Quite a few these days don’t mind marrying outside their communities but want to ensure the person is from the same field.

The reason is that same field person understands the issues that come with the occupation- long hours, loads of travel etc. This was a common problem with doctors who mostly want to marry doctors only. You often see both husband and wife in one clinic, with husband offering some special doctor services and wife offering another. It could be same services as well.

Now you get to see the same issue moving to other professions as well.   The issue is all the more for girls. They are worried that they may have to give up their profession after marriage if the in-laws family does not understand the work ethics with a profession.

Take the case of development sector. It involves a lot of travel to far remote areas for many a days. One could also be in areas where he cannot communicate about his location and well-being.  Just imagine the situation for a married woman in this case. The salary may also not be as good compared to all the work one does. If the other half is understanding nothing like it. But if not, marriage to a non-development sector person, may turn out to be a bad one. But then marrying a dev sector person alone will not guarantee all will be well. It is just minimising risks that is it.

So, if you see the registration page, it asks for details like:

  • Experience in Development Sector
  • Organisational Category – has options like Govt, NGOs,  Volunteer org, UN, etc

So a person could select on this basis.

Likewise, all other professions have their own whims and fancies. I keep coming across this issue with many a relatives.  The parents are worried to fight a suitable match for their son or daughter. And most often they say my son/daughter refuses to marry saying the person will not understand my nature of work. 

I am sure most others would relate to this problem as well. It may not be a bad idea to have more websites like these or have one website which helps you search across professions.  So far, such match making usually happens offline – mostly at offices. Having an exclusive online option should help.

Market design is a very interesting field in economics, pioneered by Al Roth. Market design for marriages is a useful way to think about the issues involved.

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