Analysis of Articles about Economic Growth - Annotated Bibliography Example

Reference List ABI/American Bankruptcy Institute (2007). Legislative highlights: Oversight Congress gets busy putting leaders on the defense. American Bankruptcy Institute Law Journal, 26 (3), 1-8. This offers a good summary of the main reasons why mortgage financing institutions went bankrupt and why the housing bubble took place. The article also gives a good look at how legislators work for the people, investigating cases of economic and financial crisis and finding ways to solve them by passing legislation. Of course, we know that legislators can also overdo it, passing laws that make life more difficult for businesses even if they are careful not to do it. Adams, R.H. Jr. (2003). "Economic growth, inequality, and poverty: Findings from a new data set." World Bank Policy Research Working Paper 2972. Washington, DC: The World Bank. Using new data assembled by the World Bank, this paper reveals one of America's darkest secrets: how millions of people can be poor in a country that is rich, and how inequality can exist amidst prosperity. The author showed that inequality in America is rising faster than in any developed nation in the world. This is alarming, because if this is not addressed by the government, there would be social unrest and discontent, that can result in bigger problems for America in the future. Alesina, A. & Rodrik, D. (1994). Distributive politics and economic growth. Quarterly Journal of Economics, 109 (2), 465-90. The authors showed how politics can be used to do good by creating economic wealth and also to do bad by affecting the decisions of people where to spend their money. The article is an eye-opener that showed how wrong government policies result in social problems. It also shows that politics is not always good, and that the people in a democracy have to do their share to prevent political abuses from taking place. Beck, T., Demirguc-Kunt, A. & Levine, R. (2004). Finance, inequality and poverty: Cross-country evidence. NBER Working Paper No. 10979, December. This paper compares the level of poverty in different nations, including rich ones like America, the U.K., and Japan. It addresses the issue of inequality among the rich and the poor and how the middle class is affected by speculative behavior. Calem, P., Gillen, K. & Wachter, S. (2004). The neighborhood distribution of sub-prime mortgage lending. Journal of Real Estate Finance and Economics, 29 (4), 393-410. This is a short but straight-to-the-point article on the spread of sub-prime mortgages in communities where people try to match the others in wealth, even if they cannot afford it. Through word-of-mouth, people who do not need loans learn to justify their borrowing even if they cannot pay them, worsening what is already a bad situation. Case, K.E. & Shiller, R.J. (2003). Is there a bubble in the housing market Brookings Papers on Economic Activity, 2003 (2), 299-342. The authors developed a mathematical index to show that there is a bubble in the housing market and pinpointed the cause to the lowering of interest rates, market overconfidence, and some degree of greed and selfishness. They predicted that the bubble would burst anytime and warned against the consequences of lower housing prices on the economy. CEA/U.S. Council of Economic Advisers (2007). Economic indicators: August 2007 (Includes data available as of September 10, 2007). Washington, DC: Government Printing Office. This is the latest set of government statistics, including house prices and interest rates. The CEA releases these figures monthly for the use of government and the business sector. Dimson, E., Marsh, P. & M. Staunton, M. (2006). Global investment returns yearbook. London: ABN-AMRO, 2006. This annual publication by one of the world's largest bank based in The Netherlands and in London contains statistics on the returns from thousands of investments all over the world. There are sections on real estate, stock, mutual funds, hedge funds, and every imaginable type of mortgage investments. Economist, The (2007, September 1). Rocky terrain ahead. The Economist, 384 (8544), 59-60. A concise and hard-hitting article on the bursting of the housing market bubble in America, it cites the neglect of risk and warns of the economic consequences. Fortune Magazine (2007, September 3). Crisis council. Fortune Magazine, 156 (4), 39-47. This special edition of a popular business bi-weekly magazine is on the collapse of the real estate, housing, and sub-prime mortgage markets in the U.S. The crisis council consists of fifteen top investment managers including the legendary Warren Buffet and discusses their opinions and views on why it happened and what would happen next. Gentile, G. (2007). "Major Home Lender Files for Bankruptcy". 2 April 2007. Yahoo.com News. Retrieved 13 September 2007, from: This is a short financial news article on the collapse of New Century Capital Corporation in California, a sub-prime lender that had many problems with the government but which was allowed to continue lending even in the face of many defaults. Harvey, K.D. (2003). How do predatory lending laws influence mortgage lending in urban areas A tale of two cities. Journal of Real Estate Research, 25 (4), 479-508. Harvey conducted two event studies to consider the effect of state or local anti-predatory lending laws in Chicago and Philadelphia, two cities that adopted ordinances patterned after federal lending laws that regulated bank lending. The study concluded that, in Chicago, sub-prime lending migrated from banks to non-banks and increased the likelihood of defaults. Similar evidence in Philadelphia was inconclusive due to the timing of data gathered for the study. IMF/International Monetary Fund (2003). When the bubble bursts: IMF Report on Asset Prices 2003. Washington: IMF. This is a special report released by the IMF to study asset pricing all over the world due to the occurrence of asset pricing bubbles. The report is a very comprehensive look into the experiences of developed and rich countries and called for government intervention in order to address a potential world economic crisis. However, the same report suggested that if the global financial system remains healthy and liberalized, the market would be able to adjust itself according to market forces. Ho, G. & A. Pennington-Cross, A. (2006). The impact of local predatory lending laws on the flow of sub-prime credit. Journal of Urban Economics, 60 (2), 210-228. The authors developed an index to examine the effects of state anti-predatory lending laws on the probability of sub-prime applications, originations, and rejections, focusing on border counties of adjacent states with and without anti-predatory lending laws, rather than entire states, to hold labor and housing markets constant. They concluded that having state anti-predatory lending laws encouraged risk-taking because borrowers reduce their fears and develop the confidence that they are protected by law against abusive lenders. Thus, borrowers take out loans with the assurance that house prices would go up and, should they default, they would be rescued by the government. Kaplan, G. A., Pamuk, E.R., Lynch, J.W., Cohen, R.D. & Balfour, J.L. (1996). Inequality in income and mortality in the United States: Analysis of mortality and potential pathways. British Medical Journal, 312 (April), 999-1003. The authors discovered that whatever the actual level of an individual's income, s/he might be unhappy or discouraged if s/he is relatively poorer than many others in society. Therefore, rising income inequality might be harmful to society not only because it represents a disparity between people but because it can cause slower economic growth, an increase in crime, worse over-all well-being, poor educational outcomes, and high death rates, much like a higher level of absolute poverty would. Kennedy, B.P., Kawachi, I. & Prothrow-Stith, D. (1996). Income distribution and mortality: Cross sectional ecological study of the Robin Hood index in the United States. British Medical Journal, 312 (April), 1004-07. This study looks at the same issues as the previous article (Kaplan et al., 1996) and is in fact the next article in the series. The Robin Hood index measures the distribution of wealth in a growing economy and concludes that while both rich and poor benefit equally from fast economic growth, their level of inequality remains at the same level because the "boats" of both would go up by the same amount. They suggest that for inequality to be reduced, the rich should be more willing to share their wealth (through taxes or philanthropy) while the poor should receive higher wages. Peterson, C. (2004). Taming the sharks: Towards a cure for the high cost credit market. Akron, OH: University of Akron Press. The author recalls the history of the regulation of interest in the U.S. and distinguishes anti-predatory lending laws from traditional usury laws by focusing on practices and loan terms beyond interest rates. Anti-predatory lending laws are not a recent development, as some states have been regulating for many decades such non-interest loan terms as pre-payment penalties and balloon clauses in order to prevent abuses. While the laws have been around for some time, people still commit the same mistakes. Rivlin, A. M. & Sawhill, I. (2004). Restoring fiscal sanity: How to balance the budget. Washington: The Brookings Institution. This is a very academic book on the federal budget deficit, arguing that deficits can never be sustainable. The authors suggested that unless the government begins to intervene by slowing down economic growth by increasing interest rates and reducing the rate of growth of investments, a point in the near future might be reached when the dollar weakens, U.S. treasury notes would be more expensive because no one would buy them, and a full-blown economic crisis would result. Rubin, J. (2003). CIBC World Markets Report. Issued May 2003. This brief report on world financial markets showed the worrying increase in U.S. debt and fiscal deficits compared to other countries. The author warns that unless there is fiscal discipline, with the government working to balance the budget, a full-blown economic crisis would result. The study cites several figures on the fast growth of debt in America in the last decade prior to the study. Shiller, R.J. (2005). Irrational exuberance (2nd Ed). Princeton, NJ: Princeton University Press. This book is exactly what I was looking for to support my viewpoint. The book analyzes the long history of the real estate market and explained well the interaction between stock and real estate markets. The author showed evidence to support his argument that the recent housing market boom bears many similarities to the stock market bubble of the late 1990s, and may eventually be followed by declining home prices for years to come. All these information helped me understand the real estate market more clearly; therefore, I can deeply analyze the internal connections in both markets. Solomon, S. (1995). The confidence game: How unelected Central Bankers are governing the changed world economy. New York: Simon and Schuster. The author studied the interaction of the world's financial markets by looking at the way Central Bankers in the U.S., Germany, Japan, England, and France coordinate their economic decisions, whether related to interest rates, exchange rates, or target economic growth and inflation rates. The book showed how the world's financial markets are connected and controlled by a small group of government officials and economists, which is frightening because people who are not elected are in control, but also somewhat reassuring because it also shows that different countries are helping each other to prevent global financial crisis from happening. The discussion on the past bubbles, especially the 1987 Black Monday crash in the New York Stock Exchange, and how the market corrected to save itself from a major crisis, are very dramatic and a good learning experience. Tully, S. (2007, September 3). "Risk returns with a vengeance." Fortune Magazine, 156 (4), 30-36. This is part of the same issue of Fortune Magazine on the market crash of 2007. This article is a discussion of the issue of risk, what it is, how it is measured, how banks and lenders try to avoid it, how borrowers regard it or not, and how overconfidence and greed result in the lowering of the perception of risk by the market. Although a bit cynical, since the author wrote that financial markets seem to go from one crisis to another, the article is also very enlightening because it shows how a free market economy makes adjustments that market forces learn to abuse. It warns that unless the market learns to check itself, a continuous cycle of boom and bust, bubbles and tears, will continue almost forever. Read More