Extreme Wildfires, Distant Air Pollution, and Household Financial Health  with Xudong An and Stuart A. Gabriel

We link detailed wildfire burn, satellite smoke plume, and ground-level pollution data to estimate the effects of extreme wildfire and related smoke and air pollution events on housing and consumer financial outcomes. Findings provide novel evidence of elevated spending, indebtedness, and loan delinquencies among households distant from the burn perimeter but exposed to high levels of wildfire-attributed air pollution. Results also show higher levels of financial distress among renters in the burn zone, particularly those with lower credit scores. Financial distress among homeowners within the fire perimeter is less prevalent, likely owing to insurance payout. Findings also show out-migration and declines in house values in wildfire burn areas. The adverse smoke and pollution effects are salient to a substantial geographically dispersed population and add appreciably to the household financial impacts of extreme wildfires.

Gender and Collaboration in the Federal Reserve System  with Deepa D. Datta 

This study examines gender and collaboration patterns among economists within the Federal Reserve System. We present new data on female representation in the twelve Federal Reserve Banks and the Board of Governors, including their research and policy output. Using this data, we first document a considerable increase in the fraction of women in the Federal Reserve System over the past 20 years, in line with trends in the economics profession, and with some heterogeneity across different Federal Reserve Banks. Second, we use the uniqueness of the Federal Reserve System as a policymaker to explore the gender gaps in policy output as compared to research.  We document a significant gender gap in research and policy output among Federal Reserve economists, by examining policy papers, working papers, and publications.  However, we find that the gender gaps in policy output are smaller than in research output, suggesting that differences in research output may be driven by different time allocations between policy and research. Third, turning to collaboration in research and policy writing, we find a tendency towards same-gender collaboration among both men and women.  Notably, we also find that women tend to have fewer collaborators overall, suggesting that the observed tendency towards same-gender collaborations may be resulting in smaller coauthorship networks for women. Finally, our data also allows us to explore differential effects on production of research and policy papers during the Covid-19 pandemic. We find results in line with the existing literature: research output in the Federal Reserve System declined more for female economists than for their male colleagues during the pandemic.  However, we find smaller effects on policy outcomes, suggesting differential effects of time allocation during the pandemic by men and women.

Air Pollution and Rent Prices: Evidence from Wildfire Smoke Plums  with Luis A. Lopez

We leverage quasi-experimental wildfire smoke shocks to analyze the causal effect of air pollution exposure (PM 2.5) on the rent and prices of housing transactions, using satellite-based smoke plumes data and ambient air pollution data. Our results indicate that the rent of homes that are not directly affected by wildfires but exposed to wildfire plumes declines by about 0.7% per unit increase in PM 2.5, representing a net loss of $108.53 per year, per unit. The response of prices is more than three-fold highlighting a gap in the willingness to pay for high air quality between tenants and owners. 

COVID-19 Rental Eviction Moratoria and Household Well-Being   with Stuart Gabriel and Xudong An, AEA Papers and Proceedings, 112: 308-12.

We investigate the impact of 2020 COVID-19 rental eviction moratoria on household well-being. Analysis of new panel data indicates that eviction moratoria reduced evictions and resulted in redirection of scarce household financial resources to immediate consumption needs, notably including food and grocery spending. We also find that eviction moratoria reduced household food insecurity and mental stress, with larger effects evidenced among African American households. Findings suggest broad salutary effects of eviction moratoria during a period of widespread virus and economic distress. 

The Determinants of Fiscal and Monetary Policies During the Covid-19 Crisis  with Effi Benmelech, NBER Working Paper 24761  

As countries around the world grapple with Covid-19, their economies are grinding to a halt. For the first time since the Great Depression both advanced economies and developing economies are in recession. Governments and central banks have responded to the pandemic and the economic crisis using both fiscal and monetary tools on a scale that the world has not witnessed before. This paper analyzes the determinants of fiscal and monetary policies during the Covid-19 crisis. We find that high-income countries announced larger fiscal policies than lower-income countries and that the ability to deploy fiscal policies when short-term rates are ultra-low is limited by a country’s access to credit markets. These findings raise the concern that countries with poor credit histories – those with lower credit ratings and, in particular, lower-income countries – will not be able to deploy fiscal policy tools effectively during economic crises.

Adjusting to Macroprudential Policies: Loan-to-Value Limits and Housing Choice   Review of Financial Studies

This study provides novel evidence regarding the effects of loan-to-value (LTV) limits on housing choices. Using a detailed loan-level dataset, I exploit the introduction of LTV limits in Israel. I find that the LTV limits led borrowers to choose housing units that were more affordable, farther from the central business district, and in lower socioeconomic neighborhoods. Additionally, these LTV limits increase interest rates and decrease loan amounts. The findings of this study indicate that macroprudential policies, which focus on the stability of the financial system, have micro implications on location choices, commuting costs, and movement to less-advantaged areas. 

The Effect of LTV-Based Risk Weights on House Prices: Evidence from an Israeli Macroprudential Policy   With Steven Laufer, Journal of Urban Economics 

This paper asks whether macroprudential policies that impose higher risk weights on high LTV mortgages can slow house price growth. By studying a 2010 Israeli macroprudential policy that only applies to mortgages above a certain value, we are able to compare prices in different segments of the market and credibly evaluate the effects of such policies on house prices. For housing units likely to be purchased using mortgages subject to the higher risk weights, we estimate that prices are lower by about 2 to 3 percent than they would have been without the policy. We find that the policy has larger effects in more expensive areas of the country and, in particular, in lower quality neighborhoods within these more expensive areas. Combining our results with previous estimates of the effect of this policy on mortgage interest rates, we derive an estimate for the semi-elasticity of house prices with respect to mortgage rates that is consistent with the upper range of estimates reported in the literature.

Macroprudential Policy: Implementation, Effects, and Lessons   Israel Economic Review, Vol. 17, No. 1 (2019)

In this paper, I review the development of macroprudential policy (MPP) and, in particular, its regulatory structure, its influence on the financial system, and its costs and benefits. I find that the effectiveness of MPP depends on the institutional setup in which it is implemented: often, MPP is under the responsibility of the central bank, due to its independence, expertise and incentives to take action. However, this setup may generate conflicts between MPP and traditional monetary policy. I also discuss another issue undermining the effectiveness of MPP, namely, “leakages,” i.e., migrations of financial activity to institutions beyond the scope of application and enforcement of the MPP tool. Based on the Israeli experience of implementing MPP, I argue that coordination between the regulatory authorities supervising different sectors of the financial system is crucial for the successful implementation of MPP. 

Assessing the impact of macroprudential tools: the case of Israel  With Nadine Baudot-Trajtenberg and Roi Frayberg, BIS Papers chapters, "Macroprudential policy frameworks, implementation and relationships with other policies", volume 94, pages 107-218.

The Israeli financial system withstood the global financial crisis (GFC) of 2007–09 relatively well and came out unscathed. Notwithstanding this favorable outcome, Israel is a small open economy, which means that its domestic financial conditions cannot be disconnected from the consequences of low global interest rates. The upward trend in domestic asset prices, particularly home prices, has prompted policymakers to use macroprudential policy tools. This paper examines the effects that those measures have had on various risk indicators pertaining to credit providers and individual borrowers. We find that two typical risk indicators – the average loan-to-value (LTV)) and payment-to-income (PTI) ratios – have declined. Moreover, the banking system has increased its capital buffer for possible credit losses on its housing loan portfolio. Nevertheless, the authorities in charge of macroprudential policy must ascertain whether the measures implemented are not shifting risks to other, perhaps less visible, parts of the financial system. To complete a full assessment of the impact such policy on systemic risk, more granular and better data would be needed.