The Time-Series Properties on Housing Prices: A Case Study of the Southern California Market

We examine the time-series relationship between housing prices in eight Southern California metropolitan statistical areas (MSAs). First, we perform cointegration tests of the housing price indexes for the MSAs, finding seven cointegrating vectors. Thus, the evidence suggests that one common trend links the housing prices in these eight MSAs, a purchasing power parity finding for the housing prices in Southern California. Second, we perform temporal Granger causality tests revealing intertwined temporal relationships. The Santa Anna MSA leads the pack in temporally causing housing prices in six of the other seven MSAs, excluding only the San Luis Obispo MSA. The Oxnard MSA experienced the largest number of temporal effects from other MSAs, six of the seven, excluding only Los Angeles. The Santa Barbara MSA proved the most isolated in that it temporally caused housing prices in only two other MSAs (Los Angels and Oxnard) and housing prices in the Santa Anna MSA temporally caused prices in Santa Barbara. Third, we calculate out-of-sample forecasts in each MSA, using various vector autoregressive (VAR) and vector error-correction (VEC) models, as well as Bayesian, spatial, and causality versions of these models with various priors. Different specifications provide superior forecasts in the different MSAs. Finally, we consider the ability of theses time-series models to provide accurate out-of-sample predictions of turning points in housing prices that occurred in 2006:Q4. Recursive forecasts, where the sample is updated each quarter, provide reasonably good forecasts of turning points.

The Moderating Role of Electoral Pressure on Congressional Ideological Polarization: A Cross-Sectional Time-Series Analysis

Reelection and self-interest are recurring themes in the study of our congressional leaders. To date, many studies have already been done on the trends between elections, party affiliation, and voting behavior in Congress. However, because a plethora of data has been collected on both elections and congressional voting, the ability to draw a connection between the two provides a very reasonable prospect. This project analyzes whether voting shifts in congressional elections have an effect on congressional voting. Will a congressman become ideologically more polarized when his electoral margins increase? Essentially, this paper assumes that all congressmen are ideologically polarized, and it is elections which serve to reel congressmen back toward the ideological middle. The election and ideological data for this study, which spans from the 56th to the 107th Congress, finds statistically significant relationships between these two variables. In fact, congressman pay attention to election returns when voting in Congress. When broken down by party, Democrats are more exhibitive of this phenomenon, which suggest that Democrats may be more likely to intrinsically follow the popular model of representation. Meanwhile, it can be hypothesized that insignificant results for Republicans indicate that Republicans may follow a trustee model of representation.

Does the Federal Reserve Follow a Non-Linear Taylor Rule?

The Taylor rule has become one of the most studied strategies for monetary policy. Yet, little is known whether the Federal Reserve follows a non-linear Taylor rule. This paper employs the smooth transition regression model and asks the question: does the Federal Reserve change its policy-rule according to the level of inflation and/or the output gap? I find that the Federal Reserve does follow a non-linear Taylor rule and, more importantly, that the Federal Reserve followed a non-linear Taylor rule during the golden era of monetary policy, 1985-2005, and a linear Taylor rule throughout the dark age of monetary policy, 1960-1979. Thus, good monetary policy is associated with a non-linear Taylor rule: once inflation approaches a certain threshold, the Federal Reserve adjusts its policy-rule and begins to respond more forcefully to inflation.