is there such a thing as the skyscraper curse? dr. mark thornton au economic club presentation mises...
TRANSCRIPT
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Is There Such a Thing as the Skyscraper Curse?
Dr. Mark ThorntonAU Economic Club Presentation
Mises Institute, September 8th, 2015@DrMarkThornton @Mises
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So What is the Skyscraper Curse?
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Andrew Lawrence, 1999
• “An unhealthy 100-year correlation exists between the world’s next tallest building and an impending financial crisis.”
• “This could just be coincidence…”• “The link between the world’s next tallest
building and economic crisis is possibly more than coincidence.”
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Lawrence’s Correlation
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“Skyscrapers and Business Cycles”Thornton, QJAE, 2005
• Theory connects skyscrapers & business cycles• “Cantillon effects: $, demand, production• $ = interest rates, credit, investment– Price of land– Size and scope of business– Skyscraper technology
• Artificially low interest & easy credit = taller• But its not just skyscraper construction
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Cause and Effect
• Cause– Artificially low interest– Easy credit conditions
• Effects– Increased borrowing– Increased investment– Increased consumption– Increased “luxury”– Skyscrapers– Boom/Bust
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Barr, et. al. “Skyscraper Curse: Separating Myth from Reality,” Applied Economics, 2015
• Cointegration tests show SKY & GDP move together, common cause(s)
• Granger causality tests show that SKY does not cause GDP: GDP causes SKY
• Announcement, Opening dates not correlated with NBER expansions or contractions
• Skyscrapers can’t predict or forecast
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The Economist Magazine
• Is there such a thing as a skyscraper curse?• Mar 28th 2015 Based on Barr et al. (2015), but
they did reference Thornton (2005)• “In other words, you cannot accurately
forecast a recession or financial panic by looking at either the announcement or the completion of the world’s tallest building.”
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Critique of Barr et al.
• “SKY & GDP move together, common cause”– That is what Thornton (2005) expects. Common
cause is artificially low interest rates• “SKY doesn’t cause GDP, GDP causes SKY”– Also expected
• Announcement/Opening dates, bad. Ground breaking, record setting dates better. No date
• Barr = expansion/contraction, Curse = Crisis
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Economist graphic 3/28/15
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August, 2007 Burj Khalifa
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Kingdom Tower in Saudi Arabia?
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