Hideaki Hirata

Global House Price Fluctuations; Synchronization and Determinants

We examine the properties of house price fluctuations across 18 advanced economies over the past 40 years. We ask two specific questions: First, how synchronized are housing cycles across these countries? Second, what are the main shocks driving movements in global house prices? To address these questions, we first estimate the global components in house prices and various macroeconomic and financial variables. We then evaluate the roles played by a variety of global shocks, including shocks to interest rates, monetary policy, productivity, credit, and uncertainty, in explaining house price fluctuations using a wide range of FAVAR models. We find that house prices are synchronized across countries, and the degree of synchronization has increased over time. Global interest rate shocks tend to have a significant negative effect on global house prices whereas global monetary policy shocks per se do not appear to have a sizeable impact. Interestingly, uncertainty shocks seem to be important in explaining fluctuations in global house prices.

Regionalization vs. Globalization

Both global and regional economic linkages have strengthened substantially over the past quarter century. We employ a dynamic factor model to analyze the implications of these linkages for the evolution of global and regional business cycles. Our model allows us to assess the roles played by the global, regional, and country-specific factors in explaining business cycles in a large sample of countries and regions over the period 1960–2010. We find that, since the mid-1980s, the importance of regional factors has increased markedly in explaining business cycles especially in regions that experienced a sharp growth in intra-regional trade and financial flows. By contrast, the relative importance of the global factor has declined over the same period. In short, the recent era of globalization has witnessed the emergence of regional business cycles.

Sources of Fluctuations: The Case of MENA

We analyze the sources of macroeconomic fluctuations in the emerging countries in the Middle East and North Africa (MENA) region using a dynamic stochastic general equilibrium model. The model economy captures some important structural characteristics of the MENA countries and can replicate the main properties of their business cycles. The results suggest that a substantial fraction of cyclical fluctuations in the MENA countries is explained by terms of trade shocks, which account for more than 60 percent of the variation in aggregate output. They also explain the bulk of cyclical fluctuations in aggregate consumption. Domestic productivity shocks explain close to 40 percent of business cycle variation in aggregate output. Government spending shocks and world interest shocks are also important in accounting for the volatility of business cycles in certain macroeconomic variables, but their overall effect on the dynamics of aggregate output appears to be relatively small.

Small Business Credit Scoring and Its Pitfalls: Evidence from Japan

This paper studies the apanese credit scoring market using data on 2,000 small and medium‐sized enterprises and a small business credit scoring (SBCS) model widely used in the market. After constructing a model for determining a banks profit maximization, some simulation exercises are conducted, and pitfalls of lending based on SBCS are indicated. The simulation results suggest that the reason why SBCS loan losses occur would be the combination of adverse selection and window‐dressing problems. In addition, omitted variable bias and transparency of financial statements are important.

Small Business Credit Scoring: Evidence from Japan

This paper studies the Japanese credit scoring market using data on 2,000 SMEs and a small business credit scoring model widely used in the market. After constructing a model for determining a bank’s profit maximization, we find the optimum loan sizes and profit levels, and point out some lending pitfalls based on small business credit scoring. We show that solving the problems of adverse selection and window dressing are the most important things to do to increase the profitability of SBCS lending. In addition, omitted variable bias and transparency of financial statements are also important.