Category: U.S. Economy

Measuring systematic risk in the international banking system

It is easier than ever to invest across international borders.  Measuring the risk associated with a country’s banking system is often a key decision international investment decisions.  Banking system z-scores are one way of measuring overall financial risk within a country’s banking system. The banking z-score captures the probability of default of a country’s banking system.

In general, the Z-score compares a bank’s buffers (capitalization and returns) with the volatility of those returns.  The banking z-score for Honduras, Brazil, and Mexico is shown below.

Here is some recent research on measuring banking system risk.

http://www.sciencedirect.com/science/article/pii/S104244311300005X

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1753735

http://www.hnb.hr/dub-konf/14-konferencija/ivicic-kunovac-ljubaj-2.pdf

 

Median rent increased for three largest Eagle Ford Shale MSAs from June 2014 to July 2014

housing

Median rent rose in San Antonio, Laredo, and Corpus Christi from June 2014 to July 2014.

rent_2014_07

Median house prices for San Antonio and Laredo fell from June 2014 to July 2014. Median house price for Corpus Christi rose from May 2014 to June 2014.

house_2014_07

Image source: http://www.asemooni.com/news/economic-news/the-president-agreed-with-the-increase-in-housing

Medical care commodities inflate at a higher rate than general inflation from June 2014 to July 2014

cpigeneral_inflation_2014_07             The consumer price index (CPI) went up from 237.693 in June 2014 to 237.909 in July 2014, an annualized rate of 1.09%. medical_commodities_2014_07 medical_services_2014_07 The price index for medical care commodities went up at an annualized rate of 3.99% from June 2014 to July 2014. During the same period, the price index for medical care services and hospital and related services went up at an annualized rate of 1.44% and 5.01%, respectively, whereas professional services went down at an annualized rate of 0.59%. Image source: http://www.shutterstock.com/pic-54762670/stock-photo-background-concept-illustration-consumer-price-index.html

Percentages, rates of increases, and change factors: what’s the difference?

One question that comes up all the time in our work is what is the difference between a percentage change and a rate of increase?  Answer:  They are the same idea, just expressed differently.  For instance, if you say the price of oil increased  by 100% that is the same as saying that the price of oil doubled.

So mathematically, the 100% increase is equal to a 2.0 times increase.  So generally, you can subtract one from a change factor (i.e. 2.0 times higher) to get the percentage increase.

 

Median rent and housing prices on average increased for three largest Eagle Ford Shale MSAs

housing

Median rent rose in both San Antonio and Laredo from May 2014 to June 2014; it fell in Corpus Christi during the same span.rent_2014_06 Median house prices for San Antonio and Corpus Christi rose from May 2014 to June 2014. Median house prices for Laredo fell from May 2014 to June 2014. house_2014_06Image source: http://www.asemooni.com/news/economic-news/the-president-agreed-with-the-increase-in-housing

Business closure rates study

SBA study on business closure rates (as opposed to failure) provides some insights on business survival rates. In a 2003 study, the SBA found 50 % survived, 17% were successful but closed and 33% closed and unsuccessful after 4-5 years.

The study found 39.5% survived after 6 years.

Source:
Headd, Brian, “Redefining Business Success: Distinguishing Between Closure and Failure,” Small Business Economics, 21, 2003, pp. 51-61, reprinted by the Office of Advocacy, U.S. Small Business Administration, 2003.

What attracts people and employers to some cities but not others ?

Economies of agglomeration

agglomerationeconomiesA:Economies of agglomeration

Prof. Moretti in his book ‘Geography of Jobs’  identifies three things,  that economists collectively refer to as the forces of agglomeration, as driving factors.

One is the size and thickness of the specific labor markets. Thick markets allow workers and employers to make better and better informed and longer lasting employer matches.

Two is the ecosystem. Effectively, Moretti shows how the soil that we are planted with our employers is a huge contributor to our individual success. For instance he resents several interesting examples that show how both smart and not-so smart people benefit from being around smart people.

The number of cited patents example is particularly interesting and telling. He also makes it clear that having access to funding is made easier when the cities’ ecosystem is better developed.

Three are knowledge spilling overs.

 

Using U.S. BLS location quotient to study job concentration within a given labor market

download (1)Job location quotients are ratios that compare the concentration of a particular job in a defined area to that of a larger area.   For example, job location quotients compare MSA employment  to that of the nation.

For instance, the BLS shows that employment per thousand jobs for JOB 1 is 0.41 in AREA 1.  In the nation as a whole, the employment per thousand for JOB 1 is 0.13.  The job title location quotient in this example is 3.09 = (0.41)/(0.13) .

The location quotient in this example is the ratio of the area concentration of occupational employment to the national average concentration. A location quotient greater than one indicates that the occupation has a higher share of employment than average, and a location quotient less than one indicates the occupation is less prevalent in the area than average.