A list of articles published by members of the Dallas Fed Research staff.

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2011 Academic Publications

House Prices and Credit Constraints: Making Sense of the U.S. Experience
The Economic Journal, May 2011
John V. Duca, John Muellbauer, and Anthony Murphy
Abstract: The U.S. house price boom has been linked to an unsustainable easing of mortgage credit standards. However, standard time series models of US house prices omit credit constraints and perform poorly in the 2000’s. We incorporate data on credit constraints for first time buyers into a model of US house prices based on the (inverted) demand for housing services. Our first time buyer loan-to-value series is weakly exogenous and captures shifts in the supply of mortgage credit and not expectations of future house price appreciation. Using this series, we estimate a U.S. house price equation that yields not only a stable long-run cointegrating relationship, a reasonable speed of adjustment, plausible income and price elasticities and an improved fit, but also sensible estimates of tax credit effects and the possible bottom in real house prices.

Credit, Housing Collateral and Consumption: Evidence from Japan, the UK and the U.S.
The Review of Income and Wealth, forthcoming 2011.
Janine Aron, John V. Duca, John Muellbauer, Keiko Murata, and Anthony Murphy
Abstract: The consumption behaviour of UK, U.S. and Japanese households is examined and compared using a modern Ando-Modigliani style consumption function. The models incorporate income growth expectations, income uncertainty, housing collateral and other credit effects.  These models therefore capture important parts of the financial accelerator. The evidence is that credit availability for UK and U.S., but not Japanese, households has undergone large shifts since 1980. The average consumption-to-income ratio rose in the UK and U.S. as mortgage down-payment constraints eased and as the collateral role of housing wealth was enhanced by financial innovations, such as home equity loans.  The estimated housing collateral effect is similar in the U.S. and UK. In Japan, land prices (which proxy house prices) continue to negatively impact consumer spending. There are negative real interest rate effects on consumption in the UK and U.S. and positive effects in Japan. Overall, this implies important differences in the transmission of monetary and credit shocks in Japan versus the U.S., UK and other credit-liberalized economies.

VAR Estimation and Forecasting When Data Are Subject to Revision
Journal of Business and Economic Statistics, forthcoming 2011
N. Kundan Kishor and Evan F. Koenig
Abstract: We show that Howrey's method for producing economic forecasts when data are subject to revision is easily generalized to handle the case where data are produced by a sophisticated statistical agency. The proposed approach assumes that government estimates are efficient with a finite lag. It takes no stand on whether earlier revisions are the result of "news" or of reductions in "noise." We present asymptotic performance results in the scalar case and illustrate the technique using several simple models of economic activity. In each case, it outperforms both conventional VAR analysis and the original Howrey method. It produces GDP forecasts that are competitive with those of professional forecasters. Special cases and extensions of the analysis are discussed in a series of appendices that are available online.