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Second DistrictHighlights

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To Buy or Not to Buy? The Changing

Relationship between ManhattanRents and Home Prices

Jason Bram

Much o the nation has experienced steep declines in housingprices in recent years. In Manhattan, however, apartment salesprices did not all as sharply. A study o price-rent ratios in theNew York City borough concludes that, while apartment rents aredriven by supply and demand orces, apartment sales prices are

driven in part by speculative actors, and they sometimes rise orall to levels incommensurate with prevailing rents. Manhattanprice-rent ratios, although o their 2008 highs, are still updramatically over the past two decades, suggesting less nancialvalue today in an apartment purchase there.

The past decades volatility in housing prices across much o the nation hasincreased the need or a better understanding o the determinants o homeprices. Indeed, many recent studies have ocused on the relationship between

prices and economic undamentalsmost notably, excess housing supply, householdincome (aordability), and/or market rents.1 Residential rent is a particularly

eective tool or analyzing whether home prices are supported by undamentals, inmuch the same way that corporate prots are useul or valuing stocks. Yet the mainshortcoming o this type o analysis is that in most o the United States, rental unitsand owner-occupied homes dier substantially in quality and, thus, value.2 In NewYork Citys borough o Manhattan, however, a lack o comparability poses less o aproblem, because there is a large luxury rental market and renters and owners otenlive side by side.

In this edition oSecond District Highlights, we examine trends in residentialrents and home (that is, apartment) purchase prices in Manhattan. We ocus on theratio o prices to rents as a way to gauge the nancial value o a home purchase. Theratio has risen dramatically over the past two decades, suggesting that there is lessvalue today in a home purchase. We study the ratio using a simplied ramework o

the relationship between housing (asset) prices and rents. In eect, we consider theundamental principle that monthly rent is determined by market conditions, whilethe price o a housing unit is based on the expected stream o rent (income) generatedby that asset minus associated costs. We conclude that apartment rents in Manhattantend to be driven by market orcesthat is, supply and demand. By comparison,

1 Well beore the peak in national home prices, Case and Shiller (2003) examined the relationship betweenprices and income measures, as well as other economic measures, across states and over time; theyconcluded that prices were higher than warranted in some areas and would likely all. Glaeser, Gyourko,and Saks (2005a) analyzed the role o supply-side actors, including regulation, in boosting home pricesparticularly in densely populated areas.

2 According to Glaeser and Gyourko (2009), marked dierences between the rental and purchase marketsmake it dicult to examine the relationship between prices and rents using a nancial ramework.

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CURRENT ISSUES IN ECONOMICS AND FINANCEvVolume 18, Number 9

apartment (co-op and condominium) sales prices, though alsolargely a unction o supply and demand, are driven in part byspeculative actors and sometimes rise or all to levels incom-mensurate with prevailing rent levels.

A Framework or Analyzing the Price-Rent RelationshipA widely used metric to gauge home values is the price-rent ratio.For an individual home, the ratio refects the residences marketprice divided by the annual market rent it would generate. Whenprice-rent ratios are calculated, they generally represent averagesor a particular geographic area, usually a metro area or county.A high ratio suggests that house prices are overvalued, while alow one suggests undervaluation. However, other variables aectthe undamental relationship between prices and rentsnamely,interest rates and, to a lesser degree, other costs, such as propertytaxes, insurance expenses, and maintenance ees.

To understand this relationship, consider how a prospective

buyer or tenant would choose between purchasing a particularapartment and renting a comparable unit. Most people view thisdecision in terms o monthly cash fow: How much money isspent each month to l ive in the residence when renting comparedwith buying? This is the ramework that real estate proessionalsand prospective buyers requently use when discussing nances,especially when an individual is deciding whether to make theplunge rom renting to buying.

However, this type o basic cash fow analysis has faws. First,the paying down o principal on ones mortgage is not an expenseper se, and the amount should not be included with mortgageinterest payments, property taxes, or monthly maintenance ees.

The paying down o principal merely represents asset accumula-tion. Second, or any given purchase price and mortgage rate,the monthly payment will vary depending on the loan-to-valueratiothat is, it will be aected by the size o the down payment.For instance, a suciently large down payment would give abuyer a relatively low monthly cash fow, even with a very highpurchase price. In the extreme case o a 100 percent down payment,the buyers monthly outlay in terms o cash fow would be una-ected by the purchase price and would vastly understate thetrue monthly cost. Another faw o this type o cash fow analysisis that it must actor in other owner costs implicitly included inones rent. Costs include property taxes, repair and maintenance,and especially monthly co-op and condo eeswhich can be

particularly high in New York City. Thereore, even i two co-op orcondo units have the same purchase price, one might be con-siderably more expensive on a monthly basis, simply because itsmonthly ees are higher. Finally, income tax implications associatedwith the deductibility o mortgage interest and property taxesmust be considered, although the implications vary depending onthe purchasers nancial circumstances.

A more accurate way to estimate the relationship betweenprices and rents is to tally up the monthly costs associated withthe purchase. Costs include maintenance ees (or a co-op),

common charges and property taxes (or a condo), upkeep costsor the unit that are included in a tenants rent, and mortgageinterest. One would also want to estimate the monthly mortgageinterest amount based on the ull purchase price, rather than onjust the amount borrowedthat is, the owner costs assuming

that the purchase was made with no down payment. This actioneectively levels the playing eld between buying and renting,because renters are not constrained by the need to make adown payment. In eect, it assumes that the expected return onmoney that might be used as a down payment (the opportunitycost) equals the mortgage interest rate.

To more ormally assess the changing relationship betweenrents and purchase prices, we establish a ramework to identiyhow relevant actors, such as mortgage rates and tax rates, tin. Based on a simplied model o home prices and rents, rentshould cover the user cost o housing. In eect, actors thatshould cause prices to rise relative to rents include:

lower interest rates,

lower eective property tax rates,

higher ederal tax rates (leading to a higher value omortgage interest deduction), and

lower maintenance/depreciation rates (monthlyoperating costs).

In addition, expectations play a role in elevating prices relative torents, specically those associated with r isk-adjusted expectedcapital gains.3 (Box 1 describes the price-rent relationship inmore detail.)

The Manhattan Housing MarketWe now apply our price-rent ramework to interpreting trends inManhattans apartment sales and rental markets over the past twodecades and in the current market. New York City has one o thehighest priced housing markets in the United States, refectingextraordinarily high land values. Various orces contribute to highland values. The combination o a limited supply o landespe-cially on the island o Manhattanand robust demand by thebusiness and household sectors helps explain why a Manhattanapartment tends to sell or a multiple o a comparably sized unitsprice in most other major U.S. cities. The primary reason or thehigh demand is twoold: A wealth o amenities motivates manypeople to live in Manhattan, and agglomeration economies makeit protable or many types o business to locate there.4

3 This refects the rate at which the home value is expected to appreciate overtime minus a risk premium. Alternatively, it can be thought o as the rate o returnon a risk-ree investment that would make someone indierent between such aninvestment and investment in the home.

4 Supply actors are also present. Glaeser, Gyourko, and Saks (2005b) attributesome o Manhattans high housing costsboth prices and rentsto supplyconstraints and regulatory issues.

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To oer insight into local real estate dynamics, we describesome basic acts and unique characteristics o Manhattan hous-ing. First, almost all housing units are in multi-amily structures,and a large majority are renter-occupied. Second, a large pro-portion o rental units are rent-stabilized, with tenants gener-ally paying below-market rents. Thus, a conventional analysiscomparing prices with rents across all housing units would lead toa distorted view o the underlying relationship between the twomarkets.5 Third, in New Yorkin contrast to other areas in thenationco-ops account or a larger share o owner-occupiedunits than condos do. Co-ops tend to have stricter rules about

owners renting their unitsparticularly or an extended periodo timeand typically have underlying mortgages, which candistort valuations.

Trends in Prices and RentsConsistent and reliable data on prices and especially rents overtime are not easy to come by. Recall that a sizable number o

5 According to the U.S. Census Bureaus 2005-09 American Community Surveys,the median price o an owner-occupied home in Manhattan ($800,000) would be

Manhattan renters occupy rent-regulated units and pay below-market rents. Thus, ofcial data on prevailing or average rentsunderstate the market rents paid by new tenants. To conductour analysis, we thereore use transaction-based rent data roma long-standing residential real estate frm. The data are basedon newly leased units and are broken out by apartment size (orexample, studio, one-bedroom); they also include relatively ewrent-stabilized apartments and are weighted more toward luxuri-ous units, which tend to be more comparable with co-ops andcondos. Similarly, the co-op and condo sales price data we use arebased on transactions, compiled rom a variety o sources by aresidential appraisal frm.6

To illustrate trends in Manhattan prices and rents over thepast two decades, we present prices and rents or one-bedroomapartments rom 1989 to 2011(Chart 1).7While prices and rentshave risen considerably over this period, prices have increasedmuch more dramaticallya result that also holds or studioapartments and particularly two-bedroom units.

Our data begin at the tail end o the 1980s housing boom.During New York Citys severe 1989-93 downturn, rents declinedonly modestly, alling 5 to 10 percent, whereas co-op and condoprices dropped nearly 25 percent. As the economy began to pick

up in 1993, so did the rental marketrom then until 1999,

Footnote 5 continued

morethan fty-fve times the median annual rent there ($14,472); these fguresconstitute a ratio considerably higher than the one suggested by our analysis.

6 Rent data are rom Nancy Packes Inc. (ormerly Feathered Nest); sales data arerom appraisal frm Miller Samuel Inc. All data are annual averages.

7 Rent fgures represent average rent, which is the only summary measureavailable. Purchase fgures are median transaction prices. Average price data arealso available, but they tend to be more volatile and are less comparable with rentsbecause o a more skewed distribution.

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Box 1

The Price-Rent Relationship

A price-rent relationship can be described by a simplifed user cost

o housing ramework as ollows: Pt

/Rt

=1/ [(it+ TP

t)/(1 TI

t) +

Mt EtGt+1], where R is the annual rent, Pis the price, iis the realinterest (mortgage) rate, TPis the property tax rate, TIis the income

tax rate,Mis the annual maintenance and depreciation rate, and

EtG

t+1is the risk-adjusted expected capital gain (appreciation) one

year ahead.a The transaction costs associated with an apartment

purchase, which can be ormidable in New York City, can be viewed

as part o (incremental to) the price, and can be added on. (Thus,

price data tend to understate the true cost o a home purchase as well

as the price-rent ratio, although the degree o understatement should

remain airly constant over time.)

Because the frst three actors in the ramework are measurable,

the price-rent relationship is oten used to iner or back out the

expected capital gain. However, the expected capital gain tends to

ampliy cycles in the housing market. The reason is that this actor is

based on subjective expectations and can be driven by recent trends

in housing prices. When prices go up rapidly (relative to rents),

peoples expectations may change in the same direction: They expect

uture appreciation to be more rapid and they increasingly see a

home purchase as less risky.b

500

1,000

1,500

2,000

2,500

3,000

3,5004,000

4,500

100,000

200,000

300,000

400,000

500,000

600,000

700,000800,000

900,000

11090499941989

Chart 1

Median Price Compared with Average Monthly Renton Manhattan One-Bedroom Apartments

Sources: Miller Samuel (prices); Nancy Packes Real Estate (rent).

Note: Price refers to the median price of one-bedroom co-ops and condominiums;

rent refers to average monthly rent on new leases.

Rentscale

Price

scale

Dollars Dollars

a Our user cost o housing ramework is described in https://www.economy.com/home/products/samples/case-shiller-methodology.pd.A more detailed analysis o house price valuation techniques can be oundat http://www.bls.gov/ore/pd/ec100090.pd.b There can also be perceived risks to notbuying. Sinai and Souleles(2005) fnd that rent riskthe risk that market rents may risesubstantiallyis a actor determining an individuals decision whether

to purchase or rent, and it can aect the price-rent ratio moderately.

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CURRENT ISSUES IN ECONOMICS AND FINANCEvVolume 18, Number 9

rents rose at an average rate o about 7 to 8 percent per year,accelerating to a double-digit pace in 2000. In contrast, apartmentprices lagged during the initial stage o the expansion, remainingessentially fat until 1996. This was when price-rent ratios bot-tomed out or one- and two-bedroom apartments and neared thebottom or studio units (Chart 2).

In the latter part o the 1990s, as the economic expansionstrengthened, home prices accelerated sharply and rose at a double-digit pacear surpassing the growth in rentsand the price-rentratio increased. Prices continued to rise relative to rents in the citys2001-03 downturn and through most o the subsequent expansion.In 2008, rents turned downward as the economy slowed, but pricescontinued to climb, which pushed price-rent ratios to record highs.8Since 2008, the ratios have retreated rom their highs, as rents haveallen less sharply than prices did in 2009 and have rebounded bymore. Despite this pullback, price-rent ratios in Manhattanremain more than twice as high as they were in the mid-1990s.

We examine these cycles and trends over the past twenty-threeyears, and emphasize some key points about prices and rents inManhattan. First, as the above discussion demonstrates, rentstend to respond airly quickly to economic cycles, while pricemovements tend to lag rents by one to two years. This pattern isconsistent with the view that rents are based more on marketundamentals, while prices refect more speculative and psycho-logical actors. Prices are also less prone to fuctuating inresponse to orces viewed as temporary. Thus, prices tend torespond more slowly to undamentals than do rents; when thetwo diverge, prices are more likely to converge back toward rentsthan the reverse.9 Second, price-to-rent ratios tend to beconsistently higher or larger apartments than or smaller units

(Chart 2). This may be due in part to the greater similaritybetween rentals and co-ops/condos among smaller apartmentsthan among larger units.10 Third, and most noteworthy, between1996 and 2008, average rents rose 60 to 70 percent, whereasselling prices more than tripled. Thus, price-to-rent ratios morethan doubled over this period, and nearly tripled or two-bedroom apartments.

Until a ew years ago, all o the actors that infuence theequilibrium price-rent ratio were likely helping to elevate pricesrelative to rents. This still appears to be true or mortgage rates,which have recently declined to historically low levels. However,the trend in eective property tax rates has evidently reversed.

Interestingly, the eective property tax rate generally ampliescycles in New York City because o the way these taxes are

8 Reported selling prices in 2008 and 2009 were likely overstated somewhatbecause o a pronounced shit in the mix o sales toward new luxury condos,according to an appraisal rm that tracks prices. However, reported rents or thoseyears were also likely overstated, as many new leases included concessions (suchas one to two months o ree rent) that oset much o the eect on price-rent ratios.

9 This result is consistent with ndings rom a nationwide analysis in Gallin (2004).

10 It may also be due to the act that studio sales transactions are more likely tobe or co-ops (rather than condos) than are sales o larger units; condos tend to bemore expensive because there is no underlying mortgage.

assessed. Annual increases in property assessments are capped;so, when prices are rising briskly, the eective property tax rateis usually low and declining, since it is based mainly on below-market property values. The declining property tax burden tendsto put additional upward pressure on prices. By the same token,when prices are alling, the eective tax rate typically risesbecause assessed values are still catching up with current marketvalues; this puts urther downward pressure on prices.

How High Is Too High?Given that the relationship between prices and rents was relatively

stable through much o the 1990s, one might surmise that the lowprice-rent ratio during that period represented the norm, and thatthe ratio should inevitably revert to that level. Such a move wouldimply that Manhattan co-op and condo prices are roughly twice ashigh as warranted by economic undamentals. However, there is nobasis or assuming that price-rent ratios in the mid-1990s werecorrect or represented any kind o long-term equilibrium. In act,there is some reason to believe that those levels may have been toolow. For example, even in 1989, price-rent ratios were 30 to 40 per-cent higher than they were in the mid-1990s. Moreover, at leastsome o the surge in the ratio since the mid-1990s can beattributed to marked declines in mortgage interest rates overthis period.11 Some o the increase also evidently refects

declining eective property tax rates.12

11 Himmelberg, Mayer, and Sinai (2005), who look at trends in local home pricesand rents in orty-six metro areas over twenty-ve years, nd that the degree towhich prices rose relative to rents is explained largely by low interest rates. By2011, thirty-year mortgage rates, which were roughly 8 percent in the mid-1990s,had allen to well under 5 percent. However, Haughwout et al. (2011) nd thattighter credit in recent years has had the opposite eect, osetting some o theinfuence o lower mortgage rates.

12 The New York City Independent Budget Oce estimates that the averageeective property tax rate ell rom 1.7 percent in 1996 to 0.8 percent in 2008;the eective rate has likely risen somewhat through 2011.

0

5

10

15

20

25

30

11090499941989

Studio

One-bedroom

Two-bedroom

Chart 2

Manhattan Price-Rent Ratio by Apartment Size

Sources: Miller Samuel (prices); Nancy Packes Real Estate (rent); Federal ReserveBank of New York calculations.

Note: The ratio represents the median price of a coop/condominium divided bythe average annual rent (monthly contract rent on new leases x 12).

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In addition to assessing changes in this ratio over time, we cangauge an appropriate level or the ratiobased on our user costo housing equationby looking at other actors aecting therelationship between prices and rents. As the equation suggests,it is possible to estimate a price, based not only on rent but alsoon other pertinent actorsspecically, the mortgage rate, theeective property tax rate, income tax rates, and the annual cost omaintenance and depreciation. In eect, this estimation enables usto determine the extent to which prices and rents are misaligned.13(Box 2 looks at how Manhattan and the New York City area com-pare with other areas in terms o the price-rent relationship.)

To illustrate this scenario, we present rent, price, and otherrelevant data or a one-bedroom Manhattan apartment accordingto various assumptions (see table). The tables rst column

which assumes no expected price appreciation, 2.5 percentannual maintenance and depreciation,14 and a reported monthlyrent o $3,055 in 2011shows that the imputed price would benearly $350,000 and the expected ratio would be 9.4roughlyhal the actual levels.15 However, i one assumes that prices areexpected to r ise 4 percent per year (column 2), the imputed priceor that same one-bedroom apartment jumps to about $550,000and the imputed price-rent ratio becomes 15still somewhatbelow the actual ratio o 17.3, but not dramatically so. I one thenassumes a somewhat lower maintenance and depreciation cost o

13 Gallin (2004) looks at the ratio o rents to prices at the national level, and ndsthat periods in which house prices are high relative to rents appear to be ollowedby periods in which prices adjust downward (relative to trend) to a greater degreethan do rents adjusting upward.

14 The maintenance and depreciation estimate is rough and highly variable.Using standard MACRS (modied accelerated cost recovery system) accountingtechniques, we assume that real estate structures depreciate 3.6 percent per year;assuming that the structure accounts or a third o the total value o a t ypicalManhattan apartment, the cost o depreciation would be 1.2 percent. Additionalmaintenance costs would include expenses typically covered by rent: water andsewer charges, uel costs, insurance costs, and building sta costs.

15 These estimated gaps may be somewhat understated because the actualprices do not include transaction costs (which oten tack on 4 to 5 percent to themeasured price), whereas the estimated prices implicitly include such costs.

2.0 percent (column 3), the imputed ratio is a little more than 16.Using parallel analysis or 1996when the ratio was at itslowwe see that the average monthly rent was $1,893, themortgage rate was 7.8 percent, and the eective property tax ratewas estimated at 1.7 percent. I we again use 2.5 percent as thecombined maintenance and depreciation rate, the predicted pricewould be $136,000 and the expected ratio would be about 6. Thisprice is 13 percent belowthe actual median price o $156,625 ora one-bedroom apartment in 1996, and the corresponding ratiois 6.9. However, i one assumes expected price appreciation o

Box 2

How Do Price-Rent Ratios in Manhattanand Other Areas Compare?

Recall that a caveat in our attempt to estimate the equilibrium level

o apartment prices involves the issue o comparabilitythat is, the

degree to which summary rent measures and summary price

measures pertain to comparable units. While this disparity appears

to pose less o a problem in Manhattan than elsewhere, it should not

be ignored completely. I the typical co-op or condo transaction is or

a considerably more desirable or luxurious apartment than the

typical rental transaction represents, the gap between actual and

predicted prices could be exaggerated.

A 2010 study by a real estate blog addressed the comparabilityissue by using estimated price-rent ratios or individual housing units in

major areas to approximate median price-rent ratios or each o the

areas. The ratios ranged rom 17.8 in metropolitan New York City

roughly in line with our estimates or Manhattanto 7.5 in

Miami-Fort Lauderdale.a These gures suggest that price-rent ratios

are high in New York City, not only when compared with earlier years

but also when compared with other metro areas. Moreover, they

imply that comparability is not substantially distorting the ratio

or Manhattan.

a Source: Zillow Real Estate Research Blog, http://www.zillow.com/blog/research/2010/09/21/a-better-price-rent-ratio/.

Illustrative Exercise: Imputed and Actual Prices and Ratios for a One-Bedroom Manhattan Apartment2011 and 1996

2011 1996

aumpo sco 1 sco 2 sco 3 sco 1 sco 2 sco 3

expc u pc chg no c 4 pc c 4 pc c no c 4 pc c 4 pc c

Mc pu pco co 2.5 pc o pc 2.5 pc o pc 2.0 pc o pc 2.5 pc o pc 2.5 pc o pc 2.0 pc o pc

Moh $3,055 $3,055 $3,055 $1,893 $1,893 $1,893

Mogg (pc) 4.5 4.5 4.5 7.8 7.8 7.8

Pop x (pc) 1.0 1.0 1.0 1.7 1.7 1.7

impu pc $344,249 $551,340 $596,170 $135,951 $178,740 $186,060

acu pc $633,750 $633,750 $633,750 $156,625 $156,625 $156,625

impu o 9.4 15.0 16.3 6.0 7.9 8.2

acu o 17.3 17.3 17.3 6.9 6.9 6.9

Sources: Nancy Packes Real Estate (rent); Board o Governors o the Federal Reserve System/Haver Analytics (mortgage rate); Federal Reserve Bank o New York estimate,based on data rom the New York City Independent Budget Oce (property tax); Miller Samuel (actual price); authors calculations.

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CURRENT ISSUES IN ECONOMICS AND FINANCEvVolume 18, Number 9

4 percent, the predicted (imputed) price rises to $180,000 and theratio climbs to nearly 8well above the actual ratiosuggestingthat prices would have been undervalued in 1996. An importantaspect o this exercise is that it illustrates how markedly not onlymortgage rates but also expectations can drive the estimation oan appropriate price-rent ratio.

ConclusionApartment prices in Manhattan have increased substantiallyrelative to rents over the past seventeen years, raising concernabout the sustainability o current prices. Although they haveretreated somewhat since 2008, price-rent ratios in the boroughare more than twice as high as they were in the mid-1990s. Parto this increase can be explained by lower mortgage rates, whichtend to lit sales prices relative to rents by reducing nancingcosts, and by lower property taxes. Moreover, price-rent ratiosappear to have been unusually low in the mid-1990s. Still, currentrent levels, mortgage rates, and property tax rates make it dicult

to account or the high prices o Manhattan co-ops and condo-miniums in 2011 without assuming an expected uture priceappreciation o at least 4 percent per year. That gure couldbe even higher i transaction costs and risk premiums areincluded. While the analysis here covers the period through 2011,reports o accelerating rents but stable apartment prices in 2012suggest that people may have tempered their expectationsor price appreciation.

ReerencesCase, Karl E., and Robert J. Shiller. 2003. Is There a Bubble in the HousingMarket? Brookings Papers on Economic Activity, no. 2: 299-342.

Gallin, Josh. 2004. The Long-Run Relationship between House Prices and Rents.Board o Governors o the Federal Reserve System, Finance and EconomicsDiscussion Series, no. 2004-50, September.

Glaeser, Edward L., and Joseph Gyourko. 2009. Arbitrage in Housing. In EdwardL. Glaeser and John M. Quigley, eds., Housing and the Built Environment: Access,Finance, Policy. Cambridge, Mass.: Lincoln Institute o Land Policy.

Glaeser, Edward L., Joseph Gyourko, and Raven E. Saks. 2005a. Why HaveHousing Prices Gone Up?American Economic Review95, no. 2 (May): 329-33.

_____. 2005b. Why Is Manhattan So Expensive? Regulation and the Rise inHouse Prices.Journal o Law and Economics 48, no. 2 (October): 331-70.

Haughwout, Andrew, Donghoon Lee, Joseph Tracy, and Wilbert van der Klaauw.2011. Real Estate Investors, the Leverage Cycle, and the Housing Market Crisis.Federal Reserve Bank o New YorkSta Reports, no. 514, September.

Himmelberg, Charles, Christopher Mayer, and Todd Sinai. 2005. Assessing HighHouse Prices: Bubbles, Fundamentals, and Misperceptions.Journal o EconomicPerspectives19, no. 4 (Fall): 67-92.

Sinai, Todd, and Nicholas S. Souleles. 2005. Owner-Occupied Housing as a Hedgeagainst Rent Risk. Quarterly Journal o Economics 120, no. 2 (May): 763-89.

ABOUT THE AUTHOR

Jo Bm o coom h rch sc Goup o h f rv Bk o nw yok.

The views expressed in this article are those o the author and do not necessarily refect the positiono the Federal Reserve Bank o New York or the Federal Reserve System.

Current Issues in Economics and Finance pubh b h rch sc Goup o h f rv Bk o nw yok.l Gobg thom Kg h o.

th co co-o o h c Gogo top.

eo s: V lPo, Mk d Mo, Mch B, K C, a s

Pouco: Jc iuzz, dv robg, J U

Bck u o Current Issues vb hp://www.wok.og/ch/cu_u/.

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