Ignazio Visco

Do Capital Gains Affect Consumption? Estimates of Wealth Effects from Italian Households’ Behavior

We use detailed data on housing prices in Italy available for a large number of years and with a fine geographical breakdown to compute capital gains and losses on the most widespread asset among consumers, housing, and inquire whether changes in housing values affect consumption. We find that consumer expenditures do react to capital gains, with a marginal propensity to consume out of real value changes of housing wealth of about 0.02. Reactions are different across types of consumers: while homeowners increase consumption when house prices increase, with a marginal propensity of about 0.035, the rentersi?½ response to the higher house cost tends to be that of increased savings. For the owners of listed stocks the response to capital gains is difficult to estimate with statistical precision, even if, for the limited sample of owners of these assets, its negative sign may be indicative of prevailing substitution over income effects.

A further result on the sign of restricted least-squares estimates

Abstract Within the context of the linear regression model, the variable of interest may be termed the focus variable while those that can be deleted from the regression may be termed doubtful variables. In this note we derive the necessary condition for a sign reversal in the coefficient of the focus variable when the doubtful variables appear in any arbitrary linear combination.

On the derivation of reduced forms of rational expectations models

Abstract This paper introduces a more intuitive and straightforward method to obtain the reduced forms of linear models containing expectations of the current endogenous variables formed rationally in various previous periods, besides the two proposed by Lucas and Aoki and Canzoneri. This method is then used, with the aid of some examples, to derive the conditions for complete (i.e., in mean and variance) policy ineffectiveness in this kind of models.

A crise financeira e as previsões dos economistas

It is perhaps early to draw lessons from the crisis that has hit the global economy. The crisis appears severe and widespread, its effects far-reaching and long-lasting. Measures of various kinds have been taken or are in the process of being taken regarding monetary policy, the use of public resources and the revision of rules and institutions on which the proper functioning of the markets and the operation of financial intermediaries depend. The present is undoubtedly a period of maximum efforts on the part of economic policy and overall political action, efforts that are directly proportional to the seriousness of the crisis. But this is also a moment in which the interpretative models used in analyzing our economies start being reconsidered and attempts are being made at identifying the reasons underlying the failures of markets, economic policies and economists’ forecasts. Besides, this is also necessary in order to better define interventions – global, substantial, focused and lasting – aimed at overcoming the crisis and, as far as possible, preventing, with the design of new rules, new institutions and new policies, such serious instability from occurring again. If overcoming the crisis will be arduous and complex, the process of revising the theoretical and quantitative frameworks of analysis, and the domestic and supranational guidelines and instruments of economic and financial policy will be equally difficult and laborious.