EconSouth (Fourth Quarter 2005)
Research Notes and News
Research Notes and News highlights recently published research as well as other news from the Federal Reserve Bank of Atlanta.
Housing price increase not fueled
primarily by monetary policy
Underlying the dramatic increase in housing prices across the United States in recent years is the question of whether the increase can be attributed to circumstances unique to each geographic market (a “local bubble”) or is a product of monetary policy, which is consistent across the nation.
In a recent working paper, authors Marco Del Negro and Christopher Otrok review state-level housing price data published by the Office of Federal Housing Enterprise Oversight from 1986 to 2004 to determine the behavior of house prices regionally and nationally. The authors find that movements in house prices have historically been driven by factors specific to a region or a state, but they also determine that from 2001 to 2004 the overall increase in house prices has been a national phenomenon.
Examining monetary policy’s influence on house prices, the authors attempt to observe how house prices would have behaved since 2001 absent expansionary monetary policy. To do this, they construct a model that extracts monetary policy shocks. Despite the commonly accepted notion that the expansionary monetary policy of the past several years is behind escalating house prices, Del Negro and Otrok find that the effect of monetary policy since 2001 on the national run-up in house prices has been small relative to the size of the increase.
Working Paper 2005-24
Do IT workers enjoy a wage premium?
The information technology (IT) boom dramatically boosted the rapid growth of the U.S. economy during the 1990s, contributing 1.4 percentage points of the 4.6 percent national average real gross domestic product growth from 1996 to 2000. As the IT boom went bust in 2001, however, the IT sector’s influence on the economy dwindled.
But a lingering effect of the IT boom may still be apparent in the wages of IT workers. In a recent article, Jason DeBacker, Julie Hotchkiss, Melinda Pitts, and John Robertson explore the extent to which variations in wages between IT-producing and non-IT industries can be accounted for by differences in wages paid to IT-related occupations.
Using data for 1996 to 2002 from the Current Population Survey’s Earner Study, the authors study a sample of more than 845,000 U.S. workers aged 18 to 64. The sample is categorized according to individuals’ primary job and is divided into nine industry groups—three IT-related and six non-IT-related.
The analysis shows that the average wage of IT occupations is greater than for non-IT occupations irrespective of industry. Individual worker characteristics such as years of education may account for some of this wage differential. But even after such characteristics and occupational differences are controlled for, workers in IT-producing industries still enjoy a wage premium over workers in other sectors.
Third Quarter 2005
examines Latin American banking
During the past 30 years, Latin America has experienced banking crises at a rate three times higher than any other region. Banking crises can have devastating economic implications and can weaken the balance sheets of both banks and borrowers. At a September conference cohosted by the Federal Reserve Bank of Atlanta and the Inter-American Development Bank, policy experts and economists discussed ways to strengthen the region’s banking systems.
One conference panel discussed the recommendations of the Basel II banking accords and their implications for policymakers. Of particular concern—and a topic of considerable controversy—was the extent to which such regulations can play a role in either countering or exacerbating crises.
A second panel discussed the extent to which more stringent anti–money laundering measures, particularly those concentrating on the financing of criminal groups and improved disclosure, have been effective in curtailing money laundering.
Raghuram Rajan, director of research at the International Monetary Fund, focused on the relationship between evolving global financial markets and volatility. While regulation is important, he believes it should not stifle the creativity and innovation of the markets.
A roundtable whose participants included current and past central bankers from Argentina, Chile, and Peru discussed foreign banks’ role in the region’s financial systems and the future of the region’s state-owned banks. The panelists agreed that regulation needs to balance a bank’s viability with the normal fluctuations of the business cycle. They also cited a strengthened role for bank boards as a better method of managing an institution’s risk.