The New York Fed’s latest Beige Book report indicates that harsh winter weather hampered economic activity in the region in early 2014.
Eight times a year, each of the nation’s twelve Federal Reserve Banks produces a report on current economic conditions in its District, based largely on anecdotal information obtained from regional business contacts. The New York Fed’s report covers New York State, northern New Jersey, and southwestern Connecticut. The twelve District reports are combined with a national summary to produce what’s come to be known as the Beige Book—a report that provides some of the most timely information available on economic conditions.
The global sell-off last May of emerging market equities and currencies of countries with high interest rates (“carry-trade” currencies) has been attributed to changes in the outlook for U.S. monetary policy, since the sell-off took place immediately following Chairman Bernanke’s May 22 comments concerning the future of the Fed’s asset purchase programs. In this post, we look back at global asset market developments over the past summer, and measure how changes in global risk aversion affected the values of carry-trade currencies and emerging market equities between May and September of last year. We find that the initial signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion, which put downward pressure on global asset prices.
The large-scale asset purchases (LSAPs) undertaken by the Fed starting in late November 2008 are widely considered to be a form of “unconventional” monetary policy. Although these interventions are certainly unprecedented, this post shows that their effect on financial conditions is not that unconventional, in the sense that the relative effects of the LSAPs on returns across broad asset classes—nominal and real government bonds, stocks, and foreign exchange—are quite similar to those of more conventional policies, such as a reduction in the federal funds rate (FFR).
Would it ever occur to anyone that Charlie and the Chocolate Factory (Roald Dahl, 1964) teaches economic lessons about “incentives, poverty, scarcity, producers, consumers, and competition”? Or that The Lorax (Dr. Seuss, 1971) covers “natural resources, choices, and scarcity”? Or that Curious George Goes to a Chocolate Factory (Margret and H. A. Rey, 1998) is an examination of “producers, capital resources, and goods”?
In a previous Liberty Street Economicspost, we introduced a framework for thinking about the risks banks face. In particular, we distinguished between asset return risk and funding risk that can interact and cause a bank to fail. In our framework, a bank can fail for two reasons:
One of the major roles of banks and other financial intermediaries is to channel funds from savings into valuable projects. In doing so, banks engage in “liquidity and maturity transformation,” since they finance long-term, illiquid projects while funding themselves with short-term, liquid liabilities. By performing this important role, banks expose themselves to the risk of runs: If depositors or other short-term creditors worry about their claims, they may withdraw funds en masse and cause the bank to fail. The recent financial crisis once again highlighted the fragility associated with financial intermediaries performing the roles of maturity and liquidity transformation. This post draws upon our paper “Stability of Funding Models: An Analytical Framework” to illustrate the determinants of a financial intermediary’s ability to survive stress events.
In a prior blog post, we saw how Maiden Lane evolved over time. It was here that a momentous event occurred in
1790, changing the history of the United States.
While serving as Secretary of State in 1790, Thomas
Jefferson rented a “mean house” at 57 Maiden Lane "for
106 pounds per year" and “not approving much of the stiff style and
etiquette of New York he gave up all his time to the establishment of his new
department, foreign affairs, and home." There was much to occupy
Jefferson’s time while he was in residence here—in particular, the debt crisis
The European Central Bank (ECB) released its 2014:Q1 Survey of Professional Forecasters (SPF) on February 13. The release comes at a time of growing concern about low Euro-zone inflation: consumer prices were up only 0.7 percent over the year in January, the fourth consecutive monthly reading of less than 1 percent and well below the ECB’s target of just below 2 percent. Some commentators have argued that falling inflation after five years of recession or very slow growth has raised the threat of deflation.
Victoria Gregory, Christina Patterson, Ayşegül Şahin, and Giorgio Topa
Fluctuations in unemployment are mostly driven by fluctuations in the job-finding prospects of unemployed workers—except at the onset of recessions, according to various research papers (see, for example, Shimer [2005, 2012] and Elsby, Hobijn, and Sahin ). With job losses back to their pre-recession levels, the job-finding rate is arguably one of the most important indicators to watch. This rate—defined as the fraction of unemployed workers in a given month who find jobs in the consecutive month—provides a good measure of how easy it is to find jobs in the economy. The chart below presents the job-finding rate starting from 1990. Clearly, the job-finding rate is still substantially below its pre-recession levels, suggesting that it is still difficult for the unemployed to find work. In this post, we explore the underlying reasons behind the low job-finding rate.