Monetary policy, economy and real estate market

Transcription

1 Jarosław T. JAKUBIK Economic Analysis Department Monetary policy, economy and real estate market Zalesie Górne / 22 November 217

2 Monetary policy, economy and real estate market 2 Overview Monetary Policy and the Housing Market Population factors Economic impact of population change on: Labour force Consumption and savings Wealth (housing and investments) Financial markets (interest rate and investment funds) Conclusions

3 Monetary policy, economy and real estate market 3 The Impact of Fiscal and Monetary Policy on the Housing Market Source: Naylor, T. H. (1967). The Impact of Fiscal and Monetary Policy on the Housing Market. Law & Contemp. Probs., 32, 384.

4 4 Natural rate of interest (r*) declined US Holston, Laubach, Wiliams (216)

5 5 Natural rate of interest (r*) declined Euro Area Holston, Laubach, Wiliams (216)

6 change in share of part-time employed Monetary policy, economy and real estate market 6 Labor market Despite the improvement in the labor market situation, in most developed economies, core inflation is constrained by weak wage growth. Wage growth is suppressed by factors such as: low labor productivity; (still) weak inflation. However, in the period after the global crisis, structural factors have become increasingly important, including: professional activation of low-income groups - women and the elderly; increase in the share of part-time and temporary contracts in countries where the labor market crisis was deep; weakening the negotiating power of employees and change of preferences in favor of employment security to the detriment of higher wages labor immigration from developing countries; increased competition as a result of structural reforms and globalization. Correlation between unemployment rate and change in share of part-time employed (pp, 216 r. in relations to 2-27) Participation rate, female aged (%) Japonia Niemcy OECD kr. rozwiniete Stany Zjednoczone Wielka Brytania Strefa euro

7 Monetary policy, economy and real estate market 7 Despite tight labour markets conditions, wage growth in the main developed economies remains weak. Low wage pressure is due, inter alia, to: i) sluggish growth in labour productivity; ii) low inflation expectations; iii) still low labour utilisation in some countries; iv) increase in labour participation in the groups with lower wages (women, elderly people); v) reduced workers wage-bargaining power and higher preferences for the job security and benefit packages over the wage increase; vi) an increased importance of temporary or part-time jobs, vii) an impact of structural reforms; viii) a declining number of hours worked. Factors explaining the deviations of wage growth from the average of 2-27 according to IMF research (WEO, 217): Unemployment rate in selected developed countries 1, Economies characterised by lower unemployment rate than the average of 2-27,5, -,5-1, -1,5-2, 4 2 Jan-12 Oct-12 Jul-13 Apr-14 Jan-15 Oct-15 Jul-16 Apr-17 Japan United Kingdom United States Euro area 1,, -1, -2, -3, -4, Economies characterised by markedly higher unemployment rate than the average of Delayed inflation Trend in productivity growth 216 Unemployment rate Share of workers forced to work part-time The rest Wage dynamics Source: OECD.

8 Monetary policy, economy and real estate market 8 Labour market in G7 countries Labour share (% of GDP) Labour productivity and wages (198=1) Labour s pricing power (%) Unemployment gap

9 Monetary policy, economy and real estate market 9 In Poland despite favourable labour demand conditions limited labour supply will lead to a slowdown in employment growth Labour demand Labour supply 6% % 6 3 2% % % % y/y (LHS) s.a. (RHS) q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4 Employment (y/y, %) Participation rate (%, RHS) Participation rate in the given age group (%, LHS ) Share of age group in the population (%, RHS) Higher wage dynamics years old years old /65 years old /65+ years old q1 11q1 12q1 13q1 14q1 15q1 16q1 17q1 18q1 19q1 19q4 Nominal wages (y/y) (%) Real wages (y/y) (%) 2

10 I 27 III 27 I 28 III 28 I 29 III 29 I 21 III 21 I 211 III 211 I 212 III 212 I 213 III 213 I 214 III 214 I 215 III 215 I 216 III 216 I 217 III 217 Monetary policy, economy and real estate market 1 Good labour market conditions have a positive influence on consumption Wage increases forecasts Wage pressure (percentage of firms) share of enterprises s.a. share of employees s.a firms with no change or increasing wage pressure only firms with increasing wage pressure (RHS) 6 4 Consumer confidence indicators Housing situation in Poland s 6 largest markets* current (s.a.) leading (s.a.) launched in quarter sold in quarter in the offer at the end of quarter *Warsaw, Kraków, Tri-City Agglomeration of Gdańsk, Sopot and Gdynia, Wrocław, Poznań, Łódź. Source: REAS.

11 Monetary policy, economy and real estate market 11 Demography, monetary policy and housing market Many researchers were concerned about the possibly depressing effects of slower population growth on aggregate demand and output growth (Keynes (1937), Hansen (1939) and Myrdal (194)). The debate on the effects of population growth on economic development focuses more on population size changes then structure changes (Bloom et al., 23). In 213 Lawrence Summers revived the term secular stagnation (Alvin Hansen, 1939) partly because an aging population creates an excess of savings relative to investments. Recently many researches focuses on a social and economic impact of an aging population on: fiscal (and monetary policy), health care system, pension systems, changing preferences.

12 Monetary policy, economy and real estate market 12 Possible implications of ageing for monetary policy Drop in the natural real rate of interest (NRI) Adjustment in external balances Changes in transmission of monetary policy and shocks Increased probability of hitting the zero lower bound (ZLB) Shift in preferences towards inflation-output volatility trade-off

13 Monetary policy, economy and real estate market 13 Demography, monetary policy and housing market Channels through which monetary transmission mechanism differs across demographics Imam, P. A. (215). Shock from graying: Is the demographic shift weakening monetary policy effectiveness. International Journal of Finance & Economics, 2(2),

14 Monetary policy, economy and real estate market 14 Demography and monetary policy population indicators in Europe 3,5 3 Fertility rate total (births per woman) 85 8 Life expectancy at birth, total (years) 2, , , Poland Euro area Poland Euro area Mortality rate Poland Euro area

15 Monetary policy, economy and real estate market 15 Demography and monetary policy - ageing Population structure, by age and sex, EU, 1994 and 214 (`) (% of total population) Share of population aged 65 years and over, 1974, 1994 and 214 (% of total population) Source: Eurostat, (215), People in the EU: who are we and how do we live?

16 Monetary policy, economy and real estate market 16 Demographic situation in Poland - ageing Source: United Nations, (217), World Population Prospects The 217 Revision Volume II: Demographic Profiles.

17 Monetary policy, economy and real estate market 17 Wealth and inequalities Demography could also affect the transmission mechanism of monetary policy to the economy, in particular, the strength of wealth effects versus income effects. Demographic change have an impact on long-run growth rate of consumption and, therefore, of output, which is a key determinant of the longer-run equilibrium interest rate.

18 Monetary policy, economy and real estate market 18 Wealth and inequalities The standard life-cycle consumption model introduced by Modigliani and Brumberg (1954, 198) assumes that individuals try to smooth consumption over their lifetimes. Savings rates will rise with age as income increases, and then decrease and become negative in retirement as earnings fall. Heller (1989) empirically proved that the increase in the share of elderly in these countries could reduce private savings. Life cycle model Net wealth depending on the age Poland (PLN thousands.) Source: NBP

19 Monetary policy, economy and real estate market 19 Wealth and inequalities Age dependency ratio (% of working-age population) Gross Savings (% of GNI)) Poland Euro area United States Poland United States Linear (United States) Euro area Linear (Euro area) Source: World Bank Database

20 Monetary policy, economy and real estate market 2 Conclusions Natural interest rate declined Low wage pressure despite tight labour market Ageing and demographic change will affect monetary policy and other economic and social polices, too! The ageing of the population make it more difficult for many advanced economies to continue to grow and to remain competitive on world markets Demographic change may affect the business cycle and the monetary policy transmission mechanism. The demographic transition will likely put downward pressure on the growth rate of potential output, the natural rate of unemployment, and the long-term equilibrium interest rate.

21 Jarosław T. Jakubik Economic Analysis Department Thank you for your attention! Zalesie Górne / 22 November 217

22

23 Monetary policy, economy and real estate market 23 References Bloom, D., Canning, D., & Sevilla, J. (23). The demographic dividend: A new perspective on the economic consequences of population change. Rand Corporation. Imam, P. A. (215). Shock from graying: Is the demographic shift weakening monetary policy effectiveness. International Journal of Finance & Economics, 2(2), Loretta J. Mester (217) Demographics and Their Implications for the Economy and Policy, Cato Institute s 35th Annual Monetary Conference: The Future of Monetary Policy Washington, DC. Naylor, T. H. (1967). The Impact of Fiscal and Monetary Policy on the Housing Market. Law & Contemp. Probs., 32, 384.