Missing Home-Buyers and Rent Inflation: The Role of Interest Rates and Mortgage Underwriting Standards
May 9, 2025
I study how monetary policy interacts with mortgage underwriting standards in shaping tenure decisions and rental market equilibria. Using property-level data from the American Housing Survey, I show that the increase in mortgage rates between 2021 and 2023 pushed many potential first-time home-buyers above FHA mortgage payment-to-income limits, restricting their access to home-ownership. This resulted in additional demand pressure on local rental markets, contributing to rent price inflation in 2023. Rentals located in cities with larger shares of constrained first-time buyers experienced steeper price growth, controlling for unit characteristics and contemporaneous economic developments. Rent inflation was more pronounced in smaller units occupied by lower-income renters, underscoring the potential for second-round distributional effects of monetary policy.
Leveraging Digital Technologies in Boosting Tax Collection
May 9, 2025
This paper explores how digitalization in the corporate sector can boost tax revenue collection,. finding that stronger firm digitalization is associated with higher tax revenues across countries and also higher tax paid across firms. The cross-country estimates illustrate that a one-standard-deviation increase in firm digitalization is associated with an increase in tax revenues-to-GDP by up to 3 percentage points, conditional upon the level of digitalization of tax administration (GovTech). A firm-level analsis reveals that firm digitalization significantly improves tax compliance among high-risk taxpayers, such as small and informal enterprises, particularly in the service sector. This indicates that digitalization not only broadens the corporate tax base but also plays a crucial role in improving tax compliance. Moreover, both country and firm-level analyses reveal a significant synergy between firm digitalization and GovTech, undescoring the importance of promoting both to enhance tax collection. These analyses also suggest that, in developing countries, it is essential to create enabling environments for firm digitalization and GovTech and address any constraints to achieve their synergy effects.
Testing the Liquidity Support Effects of the U.S. Treasury Buyback Program
May 9, 2025
The U.S. Treasury’s recently introduced liquidity support buyback program offers a natural setting to evaluate whether providing a regular mechanism for selling less liquid off-the-run Treasury securities can enhance market liquidity. In this paper, I present a direct test of this mechanism and quantify the liquidity support effects at both the individual security level and the aggregate balance sheet level of primary dealers. I utilize operational considerations related to the Treasury's selection of buyback securities that are independentof the securities’ liquidity conditions—notably, whether a security matures in a month characterized by significant cash inflows to the Treasury—to construct an instrumental variable for the Treasury’s buyback selection decisions. I find that buybacks moderately narrow bid-ask and off-the-run spreads and raise prices for securities listed by buyback, further boost prices for those purchased, and reduce primary dealers’ net holdings of Treasury bills and coupons. The liquidity support effects are particularly pronounced when dealers hold large Treasury inventories. I rationalize these findings using a model in which buybacks serve as predictable demand for dealers facing inventory constraints and holding costs, thereby mitigating illiquidity risks.
Andorra: Income and Its Drivers in a Long-Term Perspective
May 9, 2025
Income in Andorra has stagnated in the last 50 years. Starting from a very high level compared to peers, it has not grown as fast, as investment and productivity have lagged behind. In this study, we analyze the dynamics of income growth in Andorra from 1970 to today, comparing it to peer countries in Europe. We look at how peer countries successfully improved their income over time. Our findings suggest that investments in higher value-added sectors would be needed to keep the Andorran growth at potential and creating the right environment is key.
Fiscal Implications of Aging in Andorra: Pension and Healthcare System Reforms
May 9, 2025
Andorra has the highest life expectancy and the lowest fertility rate in Europe, resulting in one of the fastest-aging populations on the continent. This study assesses the long-term fiscal implications of demographic change for Andorra’s pension and healthcare systems. Without reform, public pension and healthcare expenditures are expected to rise significantly by 2050. Comprehensive pension and healthcare reforms, alongside proactive immigration policies, are essential to mitigate demographic pressures and safeguard Andorra’s macroeconomic stability over the long term.
Chile: Technical Assistance Report-Tax Revenue Projections
May 9, 2025
[This report is only available in Spanish] Accuracy in fiscal revenue projections is a fundamental pillar of the budgetary process in Chile. In contexts without economic shocks, the differences between tax revenue estimates and actual collections were minimal. However, the pandemic and numerous temporary tax policy measures introduced significant uncertainty that has complicated tax revenue projections. To address this challenge, it is crucial to identify the sources of the gaps in tax revenue projections and communicate them transparently. This Technical Assistance Report, which focused on enhancing the accuracy of tax revenue projections, made some key recommendations. They include: 1) Using proxy variables that most more accurately reflect the tax bases that are estimated; 2) Critically and prudently assessing and revisiting the impact of discretionary changes, both in tax policy and administration; and 3) Strengthening the institutional framework and transparency of the tax revenue projection process, by promoting clear and consistent methodologies that also ensure continuity and regular updates.
The Energy Origins of the Global Inflation Surge
May 9, 2025
This paper investigates the relationship between energy prices and inflation dynamics in the context of the global inflation surge during the COVID-19 pandemic. Using a comprehensive sector-level dataset covering over 30 countries and a local projections empirical strategy, we extend previous studies that primarily focused on single-country analyses or aggregate inflation measures. Our findings indicate that while the energy shocks of 2021–2022 were remarkable, the degree of inflation passthrough of energy shocks appears to be relatively stable over time. Moreover, we show that energy price shocks significantly influence inflation through stable sectoral channels, with structural characteristics such as energy dependence and price flexibility playing critical roles in the passthrough mechanism. These results underscore the necessity of a sectoral perspective in understanding inflationary pressures and highlight the importance of detailed data on price-setting mechanisms and intersectoral connectivity in understanding the energy-inflation passthrough.
Household Deleveraging: International Practices: Thailand
May 9, 2025
Household sector over-indebtedness has been a critical issue in Thailand in recent years. This paper starts with a summary of the deleveraging measures implemented so far in Thailand, and then presents four country case studies (Brazil, Hungary, Korea, and Malaysia), with a focus on the measures introduced by the authorities to address high levels of unsecured loans as they are more relevant to Thailand’s current risk profile. The case studies are followed by a brief overview of other relevant international experiences in facilitating debt rehabilitation, forgiveness, and bankruptcy. The study concludes by suggesting a comprehensive, multi-pronged approach to household deleveraging in Thailand.