Call for Papers for a CRIW/NBER Conference on
Wealth, Financial Intermediation and the Real Economy
Over the past decade, developments in financial markets have
contributed to swings in residential investment and in real estate
prices that were accompanied by large changes in personal wealth,
personal consumption and aggregate output. The sharp changes in
asset values in many markets have also served as an important
reminder that robust levels of personal net worth do not necessarily
assure financial security and retirement preparedness.
This Conference on Research in Income and Wealth plans a conference
in November, 2010 that will highlight empirical research on the
economics of wealth, financial intermediation, and the real
economy. The conference will emphasize measurement issues, linkages
between the financial markets and consumption, saving and investment,
and the implications of recent developments for future consumption
possibilities and growth. Specific topics that the conference seeks
to cover include:
Research on integration of flow of funds accounts, the national
income and product accounts, and possibly data from other sources, as
a way to fill in data gaps or gain new insights on changes in wealth,
the role of financial intermediation, or linkages between changes in
wealth, financial flows, and the operations of the real economy. Can
integrated accounts provide indications of possible imbalances,
disequilibria or sources of instability? For example, financial
markets normally channel saving by households into financing for
investment by business, but integrated macroeconomic accounts show
that this flow reversed direction during the run-up to the financial
crisis of 2007-8, and they also reveal that ratios of housing asset
values to rents or personal income and ratios of mortgage debt to
personal income were far above historical norms.
Adequacy of existing concepts and practices for measuring components
of wealth, changes in wealth, and for portraying their economic
significance. Integrated economic accounts provide a framework for
addressing many aspects of this topic, but this topic is broad enough
to include questions that do not involve integration concerns. One
of these is whether new or improved measures are needed to understand
certain kinds of assets or liabilities, including contingent
liabilities. For example, intangible assets are increasingly
important components of the capital stock and of economic wealth, but
in many respects our economic measurement framework is more suited to
an economy whose capital stock consists of tangible plant and
equipment. As another example, existing national accounts may give
an incomplete picture of household's wealth (or employers'
liabilities) from entitlements to pension benefits plans, including
those provided through arrangements with life insurance
companies. Finally, some have suggested that alternative methods of
valuation are needed for investment in assets experiencing pricing
bubbles or acute illiquidity.
Economic and measurement implications of innovations in credit
markets. Over the past three decades credit markets have undergone
dramatic changes, including a broad expansion of access to mortgages,
consumer credit, and other forms of household debt made possible by
risk-based pricing and other financial innovations and a sharp
contraction in credit availability during the financial
crisis. Important research questions arising from these developments
include how financial innovations affected spending and saving
behavior, either at the aggregate level or for particular groups of
households, how they affected real estate investment and prices, and
how they affected household balance sheets. Another set of research
questions concerns the changes in measurement that are needed to keep
pace with innovation in the financial sector.
Effects on consumption and saving. How have consumption and saving
behavior been affected by factors such as the availability of credit,
changes in net worth arising from holding gains/losses or other
changes in volume of assets, changes in the relative importances of
wages, property income, benefits and transfers within aggregate
personal income, changes in the income distribution, and changes in
demographics? New research results on effects of changes in wealth
or asset prices on consumption, saving or the labor supply of older
households would also valuable.
Saving, wealth and future consumption prospects. How have changes in
the pension landscape affected future consumption prospects of baby
boomers as they move into retirement? A related question concerns
the fiscal prospects of defined benefit plan and post-retirement
health benefit plan sponsors as increasing numbers of plan
participants retire. In addition, wealth is often treated as a
measure of future consumption possibilities, but because of the
amount of leverage present on many household balance sheets and the
lack of hedging against the uncertainty of future prices of assets on
those balance sheets, the ex ante probability distribution of future
consumption possibilities could have significant mass at low levels
of consumption even if current net worth is high. Empirical or
theoretical research on measuring future financial security or on
factors contributing to consumption "value-at-risk" for unhedged
households would help to fill in the picture that is given by
focusing just on current net worth.
How well do institutions and markets conducting financial
intermediation allocate saving to the most promising types of
investment? Models of economic growth often focus on the level of
the economy's capital stock, but if different types of investment
have different marginal rates of return, the allocation of available
financing to types of investment that generate high economic returns
is also crucial for economic growth. For example, low marginal
returns following investment booms in telecommunication and IT assets
during the late 1990s and housing in the mid-2000s clearly
contributed to subsequent cyclical downturns, and in the case of
housing, the low rate of depreciation suggests that the effects of
the misallocation may be long-lasting. The differentials between
marginal rates of return on investment types, the role of financing
in generating or maintaining these differentials, and the transience
or persistence of these differentials are possible research
topics. Another possible topic is whether required rates of return
on investment in activities such as R&D are higher because of their
risk characteristics or its inability to serve as collateral, and
whether the need to finance these activities internally leads to
strong cyclical effects for this type of investment.
Foreign trade in services and intangibles, foreign investment income
and capital flows and net international position. Do existing
economic accounts provide a complete and accurate portrayal of
international flows of finance and income and of offshore holdings of
financial and intangible assets? Do tax avoidance considerations lead
to distortions in the amounts of production and assets attributed to
foreign affiliates of US multinational corporations and to domestic
affiliates of foreign multinational corporations? How can the
apparent discrepancy between the large net international position of
the US as a debtor and its net receipts of property income be explained?
The role of financial assets and liabilities in the functioning of
the real economy. What claims on income flows generated in the real
economy or on tangible and intangible assets in the real economy
underlie the value of various financial assets held by
persons? Should working capital and financial intermediation
services be included as inputs in models of the processes of
production and exchange?
Government's role in saving and wealth. What are the government's
direct contributions to national saving and wealth formation, and how
do government policies affect saving and wealth formation?
Evidence from micro data. Household level data on wealth, income and
saving can provide important evidence on how saving is affected by
capital gains, changes in the composition of income, and changes in
the income distribution or demographics. They may also provide
evidence on covariances between consumption and asset prices, and
they can help to answer questions about retirement preparedness and
other aspects of household financial security. Furthermore,
reconciliations of evidence from micro and macro data sources can
provide evidence on the reliability of both kinds of data.
Abstracts or papers that address these or similar questions should be
uploaded by March 31, 2010 at this link
http://www.nber.org/confsubmit/backend/cfp?id=CRIWf10
The conference will take place in Washington in November of 2010.
Received on Wed Jan 13 2010 - 12:20:19 EST
