Front Matter Page

© 2006 International Monetary Fund

July 2006

IMF Country Report No. 06/278

United States: Selected Issues

This Selected Issues paper for the United States was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on June 29, 2006. The views expressed in this document are those of the staff team and do not necessarily reflect the views of the government of the United States or the Executive Board of the IMF.

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Front Matter Page

INTERNATIONAL MONETARY FUND

UNITED STATES

Selected Issues

Prepared by M. Mühleisen, S. Ouliaris, A. Swiston, E. Tsounta (all WHD), and A. Bhatia (MFD)

Approved by Western Hemisphere Department

June 29, 2006

Contents

• I. The Attractiveness of U.S. Financial Markets: The Example of Mortgage Securitization

  • A. Securitization and Recent Trends in Mortgage Markets

  • B. U.S. Housing Finance and Global Investors

  • C. Has It Gone Too Far?

  • D. Conclusion

• Boxes

• 1. U.S. House Price Estimates

• Figures

• 1. Mortgage Securitization in the U.S. Market

• 2. Residential Investment and Mortgage Growth

• 3. Mortgage Issuance by Institution

• 4. U.S. Net Foreign Asset Position and Foreign Holdings of Agency and GSE Securities

• 5. U.S. Share of Global Debt Securities Outstanding

• 6. Currency Denomination of Financial Products, 2004

• 7. Foreign Participation in Major Financial Markets

• 8. Mortgage-Backed Securities Spread

• 9. House Price Inflation

• 10. Housing Activity and Home Ownership

• 11. Model Estimation of House Price Index

• 12. Home Equity Loan Asset-Backed Securities Spread to LIBOR

• References

II. Recent Trends in Labor Supply and Demand

• A. Introduction

• B. What Explains Low Labor Market Participation?

• C. What Influenced Employment Growth?

• D. Conclusions

Figures

1. United States: Labor Market Indicators

2. Average Participation Rates by Age Cohorts, 1995-2005

3. Contribution of Demographics to the Change in the Aggregate Participation Rate, 2000-2005

4. Change in Labor Force Participation Rate by Age Group, 2000-2005

5. Growth in Non-Residential Investment and Private Employment

References

• III. Challenges Facing the U.S. Electricity Sector

• A. Introduction

• B. Evolution of the Electricity Sector

• C. Current Policy and Remaining Issues?

• Figures

• 1. Labor Productivity Growth in Electricity, Gas and Water Supply Industries

• 2. Transmission Path Constraints in the United States

• 3. Status of State Electric Industry Restructuring Activity

• References

• IV. Recent Oil Price Developments and The Performance of the U.S. Economy

  • A. Recent Developments in Crude Oil and Primary Commodity Markets

  • B. Do Rising Oil Prices Still Matter?

  • C. Policy Implications

• Figures

• 1. Oil Market Developments

• 2. U. S. Oil Intensity

• 3. Energy Prices and Taxes

• References

• V. U.S. Banking: Financial Innovation and Systemic Risk

  • A. Innovation in U.S. Banking

  • B. Exposures and Risks at LCBGs

  • C. Market-Based Surveillance

  • D. Regulation and Oversight

  • E. Conclusion

• Boxes

• 1. Mortgage Market Innovation: A Structural Break?

• 2. LCBG Sensitivity to a Real Estate Shock: A Material Issue?

• Figures

• 1. U.S. Asset-Backed Securities as Share of Global Bond Market

• 2. Financial Sector Assets, 2005

• 3. U. S. and Global Bank Profitability

• 4. U. S. and Global Bank Asset Quality

• 5. Distance to Default Indicators for the U. S. Financial System

• References

• VI. Structural Change and Competition Among Auto Manufacturers and Airlines

  • A. Introduction and Summary

  • B. An Anatomy of Losses

  • C. Intra-Industry Trends

  • D. Conclusion

• Figures

• 1. Pre-Tax Profits as Share Of Value Added

• 2. Employee Compensation as Share Of Value Added

• 3. U.S. Market Share of Major Auto Manufacturers and Airlines

• 4. Relative Prices of Motor Vehicles and Air Travel

• 5. Capacity Utilization

• 6. Labor Productivity and Unit Labor Costs, 2000-2005

• 7. Auto Manufacturers: Net Income as a Share of Operating Revenues

• 8. Airlines: Net Income as a Share of Operating Revenues

• References