Current research

No Price Like Home
American Economic Review (2017)
with Katharina Knoll and Thomas Steger


How have house prices evolved in the long-run? This paper presents annual house price indices for 14 advanced economies since 1870. Based on extensive data collection, we are able to show for the first time that house prices in most industrial economies stayed constant in real terms from the 19th to the mid-20th century, but rose sharply in recent decades. Land prices, not construction costs, hold the key to understanding the trajectory of house prices in the long-run.

Summary on VoxEu
Media coverage: Financial Times; FAZ


CEPR Working Paper (2017),
with Bjoern Richter and Paul Wachtel

This paper shows that policy-makers can distinguish between good and bad credit booms with high accuracy and they can do so in real time. Evidence from 17 countries over nearly 150
years of modern financial history shows that credit booms that are accompanied by house price
booms and a rising loan-to-deposit-ratio are much more likely to end in a systemic banking
crisis. Importantly, we demonstrate that policy-makers have the ability to spot dangerous
credit booms on the basis of data available in real time.


NBER Working Paper (2017),
with
Òscar Jordà and Alan Taylor

Fixing the exchange rate constrains monetary policy. Along with unfettered cross-border capital flows, the trilemma implies that arbitrage, not the central bank, determines how interest rates fluctuate. The annals of international finance thus provide quasi-natural experiments with which to measure how macroeconomic outcomes respond to policy rates. We find that the effects of monetary policy are much larger than previously estimated,
and that these effects are state-dependent.
CEPR Working Paper (2017),
with Moritz Kuhn and Ulrike Steins

This paper studies the distribution of U.S.  household income and wealth over the past seven
decades. We introduce a newly compiled household-level dataset based on archival data from historical waves of the Survey of Consumer Finances (SCF).  The new data confirm a substantial widening of income and wealth disparities since the 1970s. The household data also reveal  substantial differences in the composition of household portfolios along the wealth distribution. While incomes stagnated, the middle class enjoyed substantial gains in housing wealth from highly concentrated and leveraged portfolios. The housing bust of 2007 put an end to this counterbalancing effect and triggered the largest spike in wealth inequality in postwar history.


Bank Capital Redux
NBER Working Paper (2017),
with Òscar Jordà, Björn Richter and Alan Taylor

Capital ratios are a poor predictor of financial crises. This is true both for the entire history of advanced economies between 1870 and 2013 and for the post-WW2 period, and holds both within and between countries. However, higher capital buffers have social benefits in terms of macro-stability: recoveries from financial crisis recessions are much quicker with higher bank capital.


Credit Booms Gone Bust 
American Economic Review (2012),
with Alan Taylor


We study the behavior of money, credit, and macroeconomic indicators over the long run based on a new historical dataset for 14 countries over the years 1870-2008. Total credit has increased strongly relative to output and money in the second half of the twentieth century. Credit growth is a powerful predictor of financial crises, suggesting that policymakers ignore credit at their peril.
 
Dataset
Summary on VoxEU