1/2008

Editorial

It seems that wherever you go these days you hear people talking about the housing market. This is perfectly understandable given that housing market developments can have a major impact on economic activity. The big gains in house prices in many countries have raised concerns about what might happen if these gains are reversed. Moreover, recent developments in the US housing market, in particular, and fairly widely shared fears on the adverse effects on the US economy and, more generally, the global economy may have helped to sustain this discussion.
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Borrowing constraints, shocks and house price dynamics: perspectives from an OLG model 

It is an empirical fact that housing wealth constitutes a major share of households' wealth portfolio. Although recent research has shown that as households get older the relative share of housing wealth in their portfolio falls as they invest relatively more in financial assets, the economic significance of housing wealth to households cannot be discounted. Because the dynamics of housing wealth is critically dependent upon the dynamics of house prices, it is clearly important not only to understand how changes in house prices affect the economy, but also which underlying factors are critical for the dynamic behaviour of house prices.
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Exploring the relationship between banks' liquidity outlook, credit risk monitoring and bank runs 

There are many historical examples of financial fragility, where shocks that are small relative to the economy as a whole have a significant effect on the financial system. Kindleberger, for example, in his famous book Manias, Panics, and Crashes: A History of Financial Crises (1978, pp. 107-108) argues forcefully that the immediate cause of a financial crisis can be anything from a triviality to a refusal of credit to certain borrowers or a change of view that induces a significant actor to unload.
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Economic integration of Russia and China 

Last December the Bank of Finland Institute for Economies in Transition (BOFIT) held an international seminar on the integration of Russia and China into the world economy. The seminar was held on 11–12 December 2007 and addressed economic integration from many different angles.
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