What drives urban consumption in mainland china? The role of property price dynamics

This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 – 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.

Monetary and Fiscal Policy under Deep Habits

Recent work on optimal policy in sticky price models suggests that demand management through fiscal policy adds little to optimal monetary policy. We explore this consensus assignment in an economy subject to ‘deep’ habits at the level of individual goods where the counter-cyclicality of mark-ups this implies can result in government spending crowding-in private consumption in the short run. We explore the robustness of this mechanism to the existence of price discrimination in the supply of goods to the public and private sectors. We then describe optimal monetary and fiscal policy in our New Keynesian economy subject to the additional externality of deep habits and explore the ability of simple (but potentially nonlinear) policy rules to mimic fully optimal policy.

Personal Indebtedness, Spatial Effects and Crime

There is a long and detailed history of attempts to understand what causes crime. One of the most prominent strands of this literature has sought to better understand the relationship between economic conditions and crime. Following Becker (1968), the economic argument is that in an attempt to maintain consumption in the face of unemployment, people may resort to sources of illicit income. In a similar manner, we might expect ex–ante, that increases in the level of personal indebtedness would be likely to provide similar incentives to engage in criminality. In this paper we seek to understand the spatial pattern of property and theft crimes using a range of socioeconomic variables, including data on the level of personal indebtedness.

Personal Indebtedness, Spatial Effects and Crime

There is a long and detailed history of attempts to understand what causes crime. One of the most prominent strands of this literature has sought to better understand the relationship between economic conditions and crime. Following Becker (1968), the economic argument is that in an attempt to maintain consumption in the face of unemployment, people may resort to sources of illicit income. In a similar manner, we might expect ex–ante, that increases in the level of personal indebtedness would be likely to provide similar incentives to engage in criminality. In this paper we seek to understand the spatial pattern of property and theft crimes using a range of socioeconomic variables, including data on the level of personal indebtedness.