31.07.2020 | JMCB


New Publication

When to lean against the Wind

Björn Richter, Moritz Schularick, and Paul Wachtel have published their paper "When to lean against the Wind" in the Journal of Money, Credit and Banking.

Abstract: In this paper, we show that policymakers can distinguish between good and bad credit booms with high accuracy and they can do so in real time. Evidence from 17 countries over nearly 150 years of modern financial history shows that credit booms that are accompanied by house price booms and a rising loan‐to‐deposit ratio are much more likely to end in a systemic banking crisis than other credit booms. We evaluate the predictive accuracy for different classification models and show that characteristics observed in real time contain valuable information for sorting the data into good and bad booms.

29.07.2020 | JPE


New Publication

Income and Wealth Inequality in America

Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins published their paper "Income and Wealth Inequality in America, 1949-2016" in the Journal of Political Economy. 

Abstract: This paper introduces a new long-run data set based on archival data from historical waves of the Survey of Consumer Finances. Studying the joint distribution of household income and wealth, we expose the central importance of portfolio composition and asset prices for wealth dynamics in postwar America. Asset prices shift the wealth distribution because of systematic differences in household portfolios along the wealth distribution. Middle-class portfolios are dominated by housing, while rich households predominantly own business equity. Differential changes in equity and house prices shaped wealth dynamics in postwar America and decoupled the income and wealth distribution over extended periods.

01.06.2020 | JME


New Publication

The effects of quasi-random monetary experiments

Òscar Jordà, Moritz Schularick, and Alan M. Taylor published their paper "The effects of quasi-random monetary experiments" in the Journal of Monetary Economics.

Abstract: The trilemma of international finance explains why interest rates in countries that fix their exchange rates and allow unfettered cross-border capital flows are outside the monetary authority’s control. Based on this exogenous source of variation, we show that monetary interventions have large and significant effects using historical panel data since 1870. The causal effect of these interventions depends on whether: (1) the economy is above or below potential; (2) inflation is low; and (3) there is a credit boom in mortgage markets. Several novel control function adjustments account for potential spillover effects. The results have important implications for monetary policy.

18.05.2020 | VoxEU


VoxEU Column

Inequalty and household debt

Alina K. Bartscher, Moritz Kuhn, and Moritz Schularick published a VoxEU column on inequality and US household debt. 

Household debt-to-income has quadrupled in the US since WWII. This column presents historical evidence suggesting that debt-to-income ratios have risen most dramatically for middle-class households with low income growth. Middle-class households have increasingly tapped into rising housing wealth to finance spending in excess of income. Home-equity based borrowing accounts for 50% of the increase in US housing debt and turned the middle-class into the epicentre of financial fragility.

01.04.2020 | Federal Reserve Bank of St. Louis


New Publication

The College Wealth Divide

Alina K. Bartscher, Moritz Kuhn, and Moritz Schularick published their paper "The College Wealth Divide: Education and Inequality in America, 1956-2016" in the Federal Reserve Bank of St. Louis Review.

Abstract: Using new long-run microdata, this article studies wealth and income trends of households with a college degree (college households) and without a college degree (noncollege households) in the United States since 1956. We document the emergence of a substantial college wealth premium since the 1980s, which is considerably larger than the college income premium. Over the past four decades, the wealth of college households has tripled. By contrast, the wealth of noncollege households has barely grown in real terms over the same period. Part of the rising wealth gap can be traced back to systematic portfolio differences between college and noncollege households that give rise to different exposures to asset price changes. Noncollege households have lower exposure to the equity market and have profited much less from the recent surge in the stock market. We also discuss the importance of financial literacy and business ownership for the increase in wealth inequality between college and noncollege households.

12.03.2020 | IER


New Publication


Karthik Reddy, Moritz Schularick, and Vasiliki Skreta published their paper "Immunity" in the International Economic Review.

Abstract: Legal provisions that protect elected politicians from prosecution have been common throughout history and still exist in most democracies. We provide the first systematic measurement of immunity and study, theoretically and empirically, its relation to corruption. Theory predicts that immunity is a double‐edged sword. To test whether immunity is a vice or a virtue, we quantify immunity enjoyed by heads of government, ministers, and legislators in 90 countries. Controlling for standard determinants of corruption, we find that stronger immunity is associated with greater corruption. Instrumental variable estimations using immunity at the first democratic constitution suggest the effect could be causal.

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