Angelina Carvalho, Chiranjit Chakraborty and Georgia Latsi.
Policy makers have access to more and more detailed datasets. These can be joined together to give an unprecedentedly rich description of the economy. But the data are often noisy and individual entries are not uniquely identifiable. This leads to a trade-off: very strict matching criteria may result in a limited and biased sample; making them too loose risks inaccurate data. The problem gets worse when joining large datasets as the potential number of matches increases exponentially. Even with today’s astonishing computer power, we need efficient techniques. In this post we describe a bipartite matching algorithm on such big data to deal with these issues. Similar algorithms are often used in online dating, closely modelled as the stable marriage problem.
Continue reading “Matchmaker, matchmaker make me a mortgage: What policymakers can learn from dating websites”
Lizzie Drapper and Hasdeep Sethi.
In 2006, 64 English houses in every 1000 changed hands. Three years and a credit crunch later, this had halved to only 32 transactions per 1000 houses. Since 2009, transactions have recovered, but remain well below their pre-crisis level (Chart 1). Transactions are a key metric of the health of the UK housing market and can be seen as a measure of “liquidity”. The reasons behind low transactions levels may also provide further insight into people’s behaviour and view of housing in the UK. In the work set out below, we conclude that it is unlikely that transactions regain their pre-crisis level any time soon, because of affordability constraints for first-time buyers and fewer discretionary moves by existing owners.
Continue reading “Houses: who has stopped buying them?”
Phil Bunn, Lizzie Drapper, Alice Pugh and Jeremy Rowe.
If the car you’re thinking of buying may be £500 cheaper in six months’ time, why not wait until then to buy it? This kind of thinking is one reason why falling prices trouble central bankers. The spectre of deflation is especially dangerous when households keep delaying their spending in expectation of further price falls. With the economy experiencing close to zero inflation, households may have adjusted their expectations of future prices. But how important are these expectations in influencing household spending? Using a rich household survey dataset we find that while there is some evidence that lower inflation expectations lead to lower spending, income expectations (reassuringly) also play an important role, and they have picked up recently.
Continue reading “How important are households’ expectations for spending?”