CEPR Discussion Paper (2017),
with Benjamin Born, Gernot Müller, Petr Sedlacek

This paper introduces a data-driven, transparent and unbiased method to calculate the economic costs of the Brexit vote in June 2016. We let a matching algorithm determine a combination of comparison economies that best resembles the growth path of the UK economy before the Brexit referendum. The economic cost of the Brexit vote is the difference in output between the UK economy and and its synthetic doppelganger. The cumulative costs of the Brexit referendum already amount to almost 20 billion pounds and are expected to grow to more than 60 billion pounds by end-2018.

Summary on VoxEU

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. 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

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.

Summary on VoxEU
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  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.

CEPR Discussion Paper (2017)
Revision requested at the Quarterly Journal of Economics
with Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Alan Taylor

This paper answers fundamental questions that have preoccupied modern economic thought since the 18th century. What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long-run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive dataset for all major asset classes, including—for the first time—total returns to the largest, but oft ignored, component of household wealth, housing.

Media coverage: Financial Times, FAZ

CEPR Discussion 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. 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 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.

Media coverage: FAZ

NBER Working Paper (2017),
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.