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Atif Mian
@AtifRMian
, 4 tweets, 1 min read Read on Twitter
1/ I will explain why starting a major credit-fueled housing program in the middle of serious balance of payment problems is not a good idea.
2/ Large increase in mortgage credit and housing demand will fuel demand for imports, without any increase in exports.

In fact it will be worse ...
3/ housing is one of the least productive sectors of the economy. By diverting resources (eg labor and capital) into this sector, the policy will crowd out more productive sectors, especially the exporting sector.
4/ higher imports while depressing exports is the last thing Pakistan needs right now.

Please design policies with the macro picture in mind.
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More from @AtifRMian see all

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Atif Mian
@AtifRMian
1/ How should one evaluate the “structural adjustment” program between IMF and Pakistan?

The program is the result of years of poor policy choices that led to low productivity and unsustainable imbalance as i detailed in 2018.

2/ The immediate challenge is to reduce domestic demand for imports without slowing aggregate demand and output too much. That is a tough task, and only a carefully designed adjustment program will get it done.

There are 3 parts to evaluating the program, and all 3 must succeed.
3/ PART I: What will be the impact on medium-term growth?

Program starts with massive devaluation. This reduces imports, but unfortunately Pak’s exports are not much responsive. Thus most of the adjustment will be done through the most painful channel: contracting demand
Read 9 tweets
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Atif Mian
@AtifRMian
1/ The president declared yesterday, "You can’t come in. Our country is full". Is this true?

U.S. is actually experiencing its slowest population growth in almost a century, and the current fertility rate is 16% BELOW replacement.

cdc.gov/nchs/data/nvsr…
2/ Without immigration, U.S. working age population would be shrinking, with serious negative consequences for the economy.

pewresearch.org/fact-tank/2017…
3/ Growth would slow down considerably and house prices would stagnate / fall. We'd be looking at many years of "japan-like" symptoms, and political ramifications would be worse.

We can be full of prejudice, and stop immigration. But our children will pay the price.
Read 3 tweets
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Atif Mian
@AtifRMian
1/ If you are feeling bored, let's talk about the very low interest rate and why it may not be good for the global economy.

I am talking about long-term rate (r), e.g. 10 year treasury, which is not directly determined by the central bank.
2/ r has been marching down since the 80's, and essentially stuck around zero in real terms since the Great Recession.

I will not go into the reasons for why r has gone down to zero (a super-interesting question). Instead I'll focus on the *consequences* of very low r.
3/ r is one of the strongest economic forces around. A low r increases the present value of future cash flows, making it more attractive to invest today. This is why a low r is thought to be expansionary - call this the "traditional effect".
Read 15 tweets

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