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631

BBA Discussion Forum / Wage Earner's Remittance during the Month May' 2018

« on: May 26, 2018, 11:12:01 AM »

Wage Earner's Remittance during the Month May' 2018

632

Real Estate / What is 'Real Estate'

« on: May 26, 2018, 10:58:44 AM »

What is 'Real Estate'
Real estate is property made up of land and the buildings on it, as well as the natural resources of the land, including uncultivated flora and fauna, farmed crops and livestock, water and mineral deposits. Although media often refers to the "real estate market," from the perspective of residential living, real estate can be grouped into three broad categories based on its use: residential, commercial and industrial. Examples of residential real estate include undeveloped land, houses, condominiums and town houses; examples of commercial real estate are office buildings, warehouses and retail store buildings; and examples of industrial real estate include factories, mines and farms.

Real estate is "property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more generally) buildings or housing in general. Also: the business of real estate; the profession of buying, selling, or renting land, buildings, or housing."[1] It is a legal term used in jurisdictions whose legal system is derived from English common law, such as India, the United Kingdom, United States, Canada, Pakistan, Australia, and New Zealand.

 (For more information on buying a home, see: A Guide to Buying a House in the U.S.)

Next Up
COMMERCIAL REAL ESTATE
INVESTMENT REAL ESTATE
PRIVATE EQUITY REAL ESTATE
COMMERCIAL PROPERTY
BREAKING DOWN 'Real Estate'
Real estate is a special instance of real property. Real property, a broader term, includes land, buildings and other improvements – plus the rights of use and enjoyment of that land and all its improvements. Renters and leaseholders may have rights to inhabit land or buildings that are considered a part of their personal estate, but are not considered real estate.

Personal property includes intangible assets like stocks, bonds and other investments; it also includes chattels, like computers, furniture and clothes, as well as fixtures like a dishwasher, even if you are renting a home (provided you bought and installed it with the lessor's permission).

For more, see: What Is the Difference Between Real Estate and Real Property?

Residential Real Estate and Home Ownership
According to a December 2017 report from real estate website Zillow, the total value of all U.S. homes in 2017 was $31.8 trillion, more than 1.5 times the nation's Gross Domestic Product (GDP) at the time. Home ownership, also known as owner-occupancy, is the most common type of real estate investment in the United States. According to the National Multifamily Housing Council, roughly two-thirds of residents own their home. Often, they have financed the purchase by taking out a particular type of loan known as a mortgage, in which the property acts as collateral for the debt.

Individuals shopping for a mortgage to invest in real estate in the form of an owner-occupied home are faced with a variety of options. Mortgages can either be fixed-rate or variable-rate. Fixed-rate mortgages generally have higher interest rates than variable-rate mortgages, which can make them more expensive in the short run. Fixed-rate loans cost more in the short-term because they are protected from future interest rate increases (see also payment shock).

Banks publish amortization schedules that show how much of a borrower's monthly payments go to paying off interest versus how much goes to paying off the principal of the loan. Balloon loans are mortgages that don't fully amortize over time: The borrower pays interest for a set period, five years for example, and then must pay the remainder of the loan in a balloon payment at the end of the term.

Also, mortgages can come with heavy costs, including transaction fees and taxes, which are often rolled into the loan itself. Once potential homeowners have proven their eligibility and secured a mortgage from a bank or other lender, they must complete an additional set of steps to make sure the property is legally for sale and in good condition.

Commercial Real Estate
Commercial real estate is used for commerce and includes anything from strip malls and free-standing restaurants to office buildings and skyscrapers. It is often distinguished from industrial real estate, which is practical space used in the manufacturing of products. Buying or leasing real estate for commercial purposes is very different from buying a home or even buying residential real estate as an investment. Commercial leases are generally longer than residential leases. Commercial real estate returns are based on their profitability per square foot, unlike structures intended to be private residences. Moreover, lenders may require more money for a down payment on a mortgage for commercial real estate than for a residence.

For more, see: Commercial Real Estate Loans.

Investing in Real Estate
Unlike other investments, real estate is dramatically affected by its surroundings and immediate geographic area; hence the well-known real-estate maxim "location, location, location." With the exception of a severe national recession or depression, residential real estate values in particular are affected primarily by local factors, such as the area's employment rate, economy, crime rates, transportation facilities, quality of schools and other municipal services, and property taxes.

There are key differences in residential and commercial real estate investments. On the one hand, residential real estate is usually less expensive and smaller than commercial real estate and so it is more affordable for the small investor.

On the other hand, commercial real estate is often more valuable per square foot and its leases are longer, which theoretically ensures a more predictable income stream. With greater revenue comes greater responsibility; however, commercial rental real estate is more heavily regulated than residential real estate and these regulations can differ not only from country to country and state by state, but also by county and city. Even within cities, zoning regulations add a layer of unwanted complexity to commercial real estate investments.

There is also increased risk of tenant turnover in commercial rental agreements. If the lessee's business model is bad, their product is unattractive or they are simply poor managers, they might declare bankruptcy, which can abruptly stop expensive real estate from generating revenue. Moreover, just as land can appreciate in value, it can also depreciate. Once-hot retail locations have been known to decay into rotten shopping centers and dead malls.

How to Invest in Real Estate
One can invest in real estate directly by buying actual properties or parcels of land; or indirectly, by buying shares in real estate investment trusts (REITs) or mortgage-backed securities (MBS).

Investing directly in real estate results in profits (or losses) through two avenues, which haven't changed in centuries:

revenue from rent or leases
appreciation of the real estate's value
Of the two avenues above, appreciation is the most common. It’s achieved through different means, but the increase in a property’s value isn't actually realized until the owner sells it outright, or refinances his mortgage on it. Raw and undeveloped land, like the territory right outside a city’s borders, offers the biggest potential for construction, enhancement and profit. Appreciation can also come from discovering valuable materials on a plot of land, like striking oil. Or, simply by a rise in the area around the land you own.

As a neighborhood grows and develops, property values tend to climb. The gentrification of urban neighborhoods in some American cities over the last few decades has often resulted in a dramatic increase in real estate prices. Scarcity can play a factor, too. If a lot is the last of its size or kind in a prestigious area – or one in which such lots rarely become available – it obviously gains in marketability.

Income from real estate comes in many forms. The biggest generator is the rent paid on land already developed into residential or commercial properties. But companies will pay royalties for discoveries on raw land, or they may pay to build structures on it, like cell towers or pipelines. Income can also come from the indirect investments, like REITS, which trade like stocks, with real estate as their underlying security. In a REIT, the owner of multiple properties sells shares to investors and passes along rental income in the form of distributions.



Read more: Real Estate Definition | Investopedia https://www.investopedia.com/terms/r/realestate.asp#ixzz5GZzmqMiz
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633

MBA Discussion Forum / The Application of Monetary Policy: Rules, Discretion & Central Bank’s A

« on: April 25, 2018, 11:45:52 PM »

The Application of Monetary Policy: Rules, Discretion & Central Bank’s Autonomy

The debate about whether monetary policy decisions should be governed by rules or discretion has a long history. However, neither pure discretion nor fixed adherence to an intermediate monetary target has proved satisfactory. In their place several countries are moving toward a regime in which there is a clear target for the ultimate objective of monetary policy, together with a statement of the authorities decision making practices that is as open and transparent as possible.

We notice three broad phases in the approach to policy making in the postwar period. Until about the late 1960s, it was taken for granted, that formulating monetary policy required a substantial amount of discretion. From the early 1970s until the 1980s, there was a growing emphasis on rules. By the late 1980s; however, there was a swing away from rule based policy regimes. The relationship between intermediate targets and ultimate objectives became more variable under the influence of financial liberalization and innovation. In recent years it seems most central banks have recognized the need for a return to greater discretion in the use of monetary instruments.

In this context, it is necessary to provide the definition of a few terms, because the same expressions may be used to mean different things by different authors. Central banks use policy instruments to pursue ultimate policy objectives. Along the way, they are concerned with intermediate variables which are part of the policy transmission process as well as with indicator variables, which may provide information about the impact of policy, without themselves being part of the transmission mechanism.
Rules are generally taken to require the authorities to use the instruments of monetary policy to achieve a given predetermined path for an intermediate variable (usually a monetary aggregate). Intermediate variables are those which the, monetary authorities may attempt to target because of their presumed relationship with the ultimate objectives of monetary policy. The most common example of an intermediate variable is the money stock or credit stock. To the extent that growth in monetary aggregates is stably related to the ultimate objective of monetary policy (the steady growth of the nominal value of output) and to the extent that it is more feasible to control the money stock than nominal output, it makes sense to direct policy instruments towards the achievement of an intermediate variable.

Indicator variables can be defined as those that have information value about the impact of instrument on policy outcomes but are not themselves an object of control. In fact the whole range of economic quantities has a bearing on monetary policy decisions. They can include variables that in another context may be viewed as intermediate target. For example the growth of money stock can be regarded as object to be controlled. It can also be regarded as one indicator (among others) of the potential strength of demand in the economy. This underlines an important point just because a monetary variable is not used as an object of control does not mean that it does not play an important role in evaluating the stance of monetary policy.

Other indicator variables are those that convey information about the future of the economy, and the balance between inflationary and recessionary forces. They include all variables relating to the current and prospective level of real economic activity [GDP growth, industrial production, retail sales, consumer and business spending surveys, etc.]. They also include cost and price indicators [wages, import costs, consumer and producer price indices] and expectation indices, including expectations derived from financial variables such as the shape of the yield curve.

The distinction between whether variables are to be treated as indicators or intermediate targets is crucial to the distinction between rules and discretion. However, the distinction between rules and discretion is not straightforward, and, hence deserves some clarification.

The use of discretion in monetary policy is clearly not intended to imply randomness in decision making. A discretionary policy action usually reflects a systematic response by policy authorities, taken in the light of their objectives and their perceptions as to how the economy will respond to particular economic stimuli.

Arguments for discretion in the formulation and implementation of policy:

First, economics is subject to both supply shocks and demand shocks. The appropriate monetary policy response will be quite different in the two cases. If the authorities can identify the nature of different shocks, they will be able to improve welfare by exercising discretion in how they respond to them.

A second argument for discretion lies in the fact that the speed with which an economy returns to price stability following an inflationary or deflationary shock has implications for output and employment. The use of discretion may enable the central bank to tolerate some overshooting of the monetary targets to allow the return to price stability to take place in a more orderly manner.

A third argument for discretion is that the structure of the economy is changing through time in ways that cannot easily be predicted in advance. The relationship between intermediate variables and the ultimate objectives of policy can be affected by technical developments. Under such circumstances discretion, rather than a set rules, could be more appropriate.

Arguments for rules
One view is that, in a democracy, discretion from decision making should be removed from individuals and vested in rules and laws. Perhaps the more important economic argument for rule is that there is fundamentally stable relationship between an intermediate variable (a monetary aggregate) and the ultimate objective of monetary policy (the growth of nominal income). The benefits of discretion are, therefore small, since it is not possible to improve much of the outcome generated by adopting a stable money growth target. On the other hand, so the argument goes, the costs of discretion are potentially large

A subsidiary argument for rules is that financial markets operate most efficiently in the presence of certainty. If in addition to the inherent uncertainties generated by outside economic shocks, there are uncertainties about the authorities’ policy response, the difficulties faced by markets will be compounded. This argument has been formalized in the literature on the time consistency problem and the value of rules that pre-commit the authorities to a particular course of action.

The arguments in favor of rules are based more on the quality of discretionary action, than on discretion per se. it may be argued that discretionary monetary policy is subject to two systematic sources of adverse bias: too little, too late. For example, there will be greater willingness to lower interest rates than to raise them.

The Central Bank Independence: Rationale and Reality
One of the primary tenets of accepted central banking thought has been the importance of keeping central banks politically independent. No other aspect of central banking has evoked more attention and discussion than the advocacy of central bank independence of political authority. The concept of an independent central bank separates the power to create money form the power to spend money (vested in the executive). Hence, the strongest argument for an independent central bank rests on the view that subjecting the central bank to more political pressure would impart an inflationary bias to monetary policy. In the view of many observers, politicians in a democratic society are short sighted, because they are driven by the need to win their next election and they are unlikely to focus in long run objectives, such as promoting a stable price level. Instead they will seek short run solutions to problems even if the short run solutions have undesirable long run effects. A politically insulted central bank is more likely to be concerned with long run objectives and thus be a defender of a sound currency and a stable price. Putting the central bank under the control of the government is considered dangerous because the central bank can be used to facilitate financing large budget deficits and thus this help out might lead to a more inflationary bias in the economy. An independent central bank is better able to resist this pressure from government expenditure without raising taxes. An independent central bank largely removed from political pressure is needed to ensure justice to those who lose from inflation.

Another argument for central bank independence is that conduct of monetary policy is too important to leave to politicians who may have lack of expertise at making hard decisions on issues of great economic importance, such as reforming the banking system, or reducing the budget deficit. The crucial parameters like price level and exchange rate under no circumstances should be transferred into political control variable. But the removal of monetary policy form the political sphere is itself a political act. There seems to be an even stronger case for independent central bank in the developing countries given the greater frequency and arbitrariness of political change coupled with the politicization of finance .Recent research demonstrates that political instability causes instability at the central bank too, although the spillover varies across countries and type of political traditions. These are hard question which have not been addressed in the debate on central bank independence.

The Case against Independence of Central Bank
Proponents of control of central bank by government argue that it is undemocratic to have monetary policy (which affects everyone in the economy) formulated by an elite group responsible to none. The public holds the president or parliament responsible for the economic well being of the country, yet they lack control over the government agency, the central bank that may well be the most important factor in determining the health of the economy. Monetary policy involves difficult decisions that need a long run point of view. The public holds the government responsible for the economic conditions that result from all the policies followed by government. Hence the government should have control over monetary policy. It seems to be undemocratic to say that elected officials, in a parliamentary democracy, should not be trusted to judge monetary policy.

Monetary and fiscal policies should be integrated and adequate integration cannot be achieved merely by a process of informal consultation. Rather it requires that the central bank be part of the administration. Giving the government control over the central bank need not necessarily weaken its influence, but might even strengthen it. If it were a part of the administration, the central bank counsel would then be better heeded by the government.

However, there is yet no consensus on whether an independent central bank is a good idea, although public support for independence of central bank seems to have been growing in various countries of the world.

The for and against arguments for independence of central bank may give the misleading impression that the choice is between two irreconcilable extremes. But this is not so. Even if the central bank were to lose its formal independence and become a part of government administration, there could still be an attempt to keep it out of partisan politics.

Professor Rafiqul Islam
Faculty of Business & Economics
Daffodil International University
Published in "The Financial Express"
Wednesday, January 22,2014

634

BBA Discussion Forum / [center]The Application of Monetary Policy: Rules, Discretion & Central Bank’s A

« on: April 25, 2018, 11:44:30 PM »

The Application of Monetary Policy: Rules, Discretion & Central Bank’s Autonomy

The debate about whether monetary policy decisions should be governed by rules or discretion has a long history. However, neither pure discretion nor fixed adherence to an intermediate monetary target has proved satisfactory. In their place several countries are moving toward a regime in which there is a clear target for the ultimate objective of monetary policy, together with a statement of the authorities decision making practices that is as open and transparent as possible.

We notice three broad phases in the approach to policy making in the postwar period. Until about the late 1960s, it was taken for granted, that formulating monetary policy required a substantial amount of discretion. From the early 1970s until the 1980s, there was a growing emphasis on rules. By the late 1980s; however, there was a swing away from rule based policy regimes. The relationship between intermediate targets and ultimate objectives became more variable under the influence of financial liberalization and innovation. In recent years it seems most central banks have recognized the need for a return to greater discretion in the use of monetary instruments.

In this context, it is necessary to provide the definition of a few terms, because the same expressions may be used to mean different things by different authors. Central banks use policy instruments to pursue ultimate policy objectives. Along the way, they are concerned with intermediate variables which are part of the policy transmission process as well as with indicator variables, which may provide information about the impact of policy, without themselves being part of the transmission mechanism.
Rules are generally taken to require the authorities to use the instruments of monetary policy to achieve a given predetermined path for an intermediate variable (usually a monetary aggregate). Intermediate variables are those which the, monetary authorities may attempt to target because of their presumed relationship with the ultimate objectives of monetary policy. The most common example of an intermediate variable is the money stock or credit stock. To the extent that growth in monetary aggregates is stably related to the ultimate objective of monetary policy (the steady growth of the nominal value of output) and to the extent that it is more feasible to control the money stock than nominal output, it makes sense to direct policy instruments towards the achievement of an intermediate variable.

Indicator variables can be defined as those that have information value about the impact of instrument on policy outcomes but are not themselves an object of control. In fact the whole range of economic quantities has a bearing on monetary policy decisions. They can include variables that in another context may be viewed as intermediate target. For example the growth of money stock can be regarded as object to be controlled. It can also be regarded as one indicator (among others) of the potential strength of demand in the economy. This underlines an important point just because a monetary variable is not used as an object of control does not mean that it does not play an important role in evaluating the stance of monetary policy.

Other indicator variables are those that convey information about the future of the economy, and the balance between inflationary and recessionary forces. They include all variables relating to the current and prospective level of real economic activity [GDP growth, industrial production, retail sales, consumer and business spending surveys, etc.]. They also include cost and price indicators [wages, import costs, consumer and producer price indices] and expectation indices, including expectations derived from financial variables such as the shape of the yield curve.

The distinction between whether variables are to be treated as indicators or intermediate targets is crucial to the distinction between rules and discretion. However, the distinction between rules and discretion is not straightforward, and, hence deserves some clarification.

The use of discretion in monetary policy is clearly not intended to imply randomness in decision making. A discretionary policy action usually reflects a systematic response by policy authorities, taken in the light of their objectives and their perceptions as to how the economy will respond to particular economic stimuli.

Arguments for discretion in the formulation and implementation of policy:

First, economics is subject to both supply shocks and demand shocks. The appropriate monetary policy response will be quite different in the two cases. If the authorities can identify the nature of different shocks, they will be able to improve welfare by exercising discretion in how they respond to them.

A second argument for discretion lies in the fact that the speed with which an economy returns to price stability following an inflationary or deflationary shock has implications for output and employment. The use of discretion may enable the central bank to tolerate some overshooting of the monetary targets to allow the return to price stability to take place in a more orderly manner.

A third argument for discretion is that the structure of the economy is changing through time in ways that cannot easily be predicted in advance. The relationship between intermediate variables and the ultimate objectives of policy can be affected by technical developments. Under such circumstances discretion, rather than a set rules, could be more appropriate.

Arguments for rules
One view is that, in a democracy, discretion from decision making should be removed from individuals and vested in rules and laws. Perhaps the more important economic argument for rule is that there is fundamentally stable relationship between an intermediate variable (a monetary aggregate) and the ultimate objective of monetary policy (the growth of nominal income). The benefits of discretion are, therefore small, since it is not possible to improve much of the outcome generated by adopting a stable money growth target. On the other hand, so the argument goes, the costs of discretion are potentially large

A subsidiary argument for rules is that financial markets operate most efficiently in the presence of certainty. If in addition to the inherent uncertainties generated by outside economic shocks, there are uncertainties about the authorities’ policy response, the difficulties faced by markets will be compounded. This argument has been formalized in the literature on the time consistency problem and the value of rules that pre-commit the authorities to a particular course of action.

The arguments in favor of rules are based more on the quality of discretionary action, than on discretion per se. it may be argued that discretionary monetary policy is subject to two systematic sources of adverse bias: too little, too late. For example, there will be greater willingness to lower interest rates than to raise them.

The Central Bank Independence: Rationale and Reality
One of the primary tenets of accepted central banking thought has been the importance of keeping central banks politically independent. No other aspect of central banking has evoked more attention and discussion than the advocacy of central bank independence of political authority. The concept of an independent central bank separates the power to create money form the power to spend money (vested in the executive). Hence, the strongest argument for an independent central bank rests on the view that subjecting the central bank to more political pressure would impart an inflationary bias to monetary policy. In the view of many observers, politicians in a democratic society are short sighted, because they are driven by the need to win their next election and they are unlikely to focus in long run objectives, such as promoting a stable price level. Instead they will seek short run solutions to problems even if the short run solutions have undesirable long run effects. A politically insulted central bank is more likely to be concerned with long run objectives and thus be a defender of a sound currency and a stable price. Putting the central bank under the control of the government is considered dangerous because the central bank can be used to facilitate financing large budget deficits and thus this help out might lead to a more inflationary bias in the economy. An independent central bank is better able to resist this pressure from government expenditure without raising taxes. An independent central bank largely removed from political pressure is needed to ensure justice to those who lose from inflation.

Another argument for central bank independence is that conduct of monetary policy is too important to leave to politicians who may have lack of expertise at making hard decisions on issues of great economic importance, such as reforming the banking system, or reducing the budget deficit. The crucial parameters like price level and exchange rate under no circumstances should be transferred into political control variable. But the removal of monetary policy form the political sphere is itself a political act. There seems to be an even stronger case for independent central bank in the developing countries given the greater frequency and arbitrariness of political change coupled with the politicization of finance .Recent research demonstrates that political instability causes instability at the central bank too, although the spillover varies across countries and type of political traditions. These are hard question which have not been addressed in the debate on central bank independence.

The Case against Independence of Central Bank
Proponents of control of central bank by government argue that it is undemocratic to have monetary policy (which affects everyone in the economy) formulated by an elite group responsible to none. The public holds the president or parliament responsible for the economic well being of the country, yet they lack control over the government agency, the central bank that may well be the most important factor in determining the health of the economy. Monetary policy involves difficult decisions that need a long run point of view. The public holds the government responsible for the economic conditions that result from all the policies followed by government. Hence the government should have control over monetary policy. It seems to be undemocratic to say that elected officials, in a parliamentary democracy, should not be trusted to judge monetary policy.

Monetary and fiscal policies should be integrated and adequate integration cannot be achieved merely by a process of informal consultation. Rather it requires that the central bank be part of the administration. Giving the government control over the central bank need not necessarily weaken its influence, but might even strengthen it. If it were a part of the administration, the central bank counsel would then be better heeded by the government.

However, there is yet no consensus on whether an independent central bank is a good idea, although public support for independence of central bank seems to have been growing in various countries of the world.

The for and against arguments for independence of central bank may give the misleading impression that the choice is between two irreconcilable extremes. But this is not so. Even if the central bank were to lose its formal independence and become a part of government administration, there could still be an attempt to keep it out of partisan politics.

Professor Rafiqul Islam
Faculty of Business & Economics
Daffodil International University
Published in "The Financial Express"
Wednesday, January 22,2014

635

Real Estate / রিয়েল এস্টেট বিষয়ে পড়াশুনার সুযোগ

« on: April 25, 2018, 11:41:50 PM »

http://bre.daffodilvarsity.edu.bd/images/publication/muktoakash.jpg