Abstract

We study the impact of the Fed’s monetary policy announcements on households’ expectations by comparing responses to the Survey of Consumer Expectations before and after Federal Open Market Committee (FOMC) meetings, over the period 2013-2019. We find that Fed decisions affect expectations of interest rates on savings accounts, particularly for respondents with high financial and numerical literacy. The impact of monetary policy announcements on inflation expectations is muted, even in response to some of the most relevant meetings of the FOMC that took place during that period. Expectations of personal financial conditions are barely affected. Our results stand in contrast to experimental studies that find strong effects of monetary policy and other macroeconomic news on expectations of households receiving a specific treatment, suggesting that the news naturally reaching the general population may provide weaker signals.

Abstract

Using data from the New York Federal Reserve's Survey of Consumer Expectations, we study how the United States Bureau of Labor Statistics' Employment Situation Reports (Jobs Reports) affect individuals' expectations about the likelihood of losing their own job. We do this in two steps. First, we estimate the information shocks of the jobs reports to expectations about the development of the national unemployment rate in the next twelve months. We do this by comparing survey responses shortly before and after publication of the reports. Second, we estimate how these shocks affect individuals' expectations about losing their own job in the same time frame. The results show that when a report increases beliefs about the likelihood of a rise in the national unemployment rate in the next twelve months by 1 percentage point, beliefs about the likelihood of personal job loss during that time increase by approximately 0.16 percentage points. The effect is more pronounced for individuals with a household income of over $100,000 a year. We further find that the information shock positively affects individuals' beliefs about the likelihood of voluntarily leaving their job and negatively affects their beliefs about the likelihood of finding a new job if they were to lose their current one. Our results are robust to the use of different bandwidths around the reports' publications. Placebo treatments provide reassurance that the information shock is indeed the mechanism driving the result.

Abstract

Research interest in the reaction of consumption to expected inflation has increased in recent years due to efforts by central banks to kick-start demand by steering inflation expectations. We contribute to this literature by analysing whether various components of households’ balance sheets determine how consumption reacts to expected inflation. Two channels in particular are conceivable: an increase in inflation expectations can raise consumption through direct increases in expected real wealth, e.g. for households with nominal financial liabilities. By affecting the real interest rate, expected inflation can interact with wealth if only those households can adapt their consumption to current real interest rates that are not budget constrained or sufficiently liquid to shift funds between consumption and savings. We investigate these channels empirically using household-level information on balance sheets, durable consumption, and inflation expectations from the Dutch Central Bank’s Household Survey. We find that household net worth moderates the relation between expected inflation and durable spending decisions. This effect is particularly strong for households with fixed interest rate mortgages.

Abstract

While indices tracing the evolutions of regional house prices are increasingly available, this is less the case for similar data on house price levels. And where data on house price levels exist, they are not necessarily consistent with the patterns observed from house price indices. Yet, consistent regional statistics on house price levels are fundamental to assess housing affordability, potential barriers to labour mobility across regions, and for the design of housing policies. This article puts forward a method to compile regional house price levels that are consistent with the evolutions given by quality-adjusted house price indices, representative of the underlying stock of dwellings, and based on the information on house price levels that is available at all dates rather than in a single reference year. This method could be scaled up to different countries. The results obtained with Spanish data show that the decline in house prices following the global financial crisis of 2008-09 initially reduced the dispersion in house prices across Spanish regions, but this dispersion has increased again afterwards, and since 2016, it exceeds the one recorded in 2008. A comparison of price-per-m² to regional-income ratios shows that the relative housing affordability in the region of Madrid deteriorated compared to all other Spanish regions in the last decade. Monitoring whether shifts in housing demand following the COVID-19 pandemic will reverse this trend will be key.

Abstract

Selling homes is not easy. Home sellers usually need to apply a price discount to swiftly close a deal, and more so when housing market activity is low. Using detailed data on home listings and transactions in Spain, we provide unique estimates of the price discount across regional submarkets and time. We document that the price discount is strongly countercylical, as it increases with declining market conditions, and viceversa during upturns. Despite substantial heterogeneity, regional price discounts are synchronized and a single common factor can account for about sixty percent of their variation, thus suggesting the existence of a national housing cycle. Finally, we document that the main factors linked to changes in the price discount are developments in income, population, and interest rates, which are jointly able to explain the bulk of variation in housing market liquidity across regions and time. Besides providing a formal test of the performance of the price spread in gauging housing market liquidity, this study conveys practical information to real estate market participants, policymakers, and financial institutions for which assessing conditions in Spanish housing markets is a central task.