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8 posts from April 2011

April 18, 2011

What Is Driving the Recent Rise in Consumer Inflation Expectations?

Giorgio Topa, Wilbert van der Klaauw, Olivier Armantier, and Basit Zafar

The Thomson Reuters/University of Michigan Survey of Consumers (the “Michigan Survey” hereafter) is the main source of information regarding consumers’ expectations of future inflation in the United States. The most recent release of the Michigan Survey on March 25 drew considerable attention because it showed a large spike in year-ahead expectations for inflation: as shown in the chart below, the median rose from 3.4 to 4.6 percent and the other quartiles of responses showed similar increases. What may have caused this rise in inflation expectations and what lessons should be taken from it? In this post, we draw upon the findings of an ongoing New York Fed research project to shed some light on the possible sources of the recent increase and to gauge its significance. While our research spans both short- and medium-term inflation expectations, this blog post discusses movements in short-term measures only and does not discuss medium-term expectations.

Continue reading "What Is Driving the Recent Rise in Consumer Inflation Expectations?" »

Posted by Blog Author at 10:00 AM in Monetary Policy | Permalink | Comments (1)

April 15, 2011

Historical Echoes: Popular Science Meets Liquidity Hoarding

New York Fed Research Library

In times of economic uncertainty, most people’s natural response is to cling to cash in the interest of self-preservation. As the recent financial crisis demonstrated, financial institutions may hoard cash as well, creating a credit freeze.

Continue reading "Historical Echoes: Popular Science Meets Liquidity Hoarding" »

Posted by Blog Author at 10:00 AM in Historical Echoes | Permalink

April 13, 2011

Why Did U.S. Branches of Foreign Banks Borrow at the Discount Window during the Crisis?

Linda Goldberg and David Skeie

To help contain the economic damage caused by the recent financial crisis, the Federal Reserve extended large amounts of liquidity to financial firms through traditional lending facilities such as the discount window as well as through newly designed facilities. Recently released Federal Reserve data on discount window borrowing show that some U.S. branches and agencies of foreign banks were among the most active users of the window. In this post, we explain why U.S. branches borrow at the discount window. We also discuss two main reasons why these branches had a large need for dollars during the crisis and how discount window loans to them helped stabilize the financial system and the real economy in the United States.

Continue reading "Why Did U.S. Branches of Foreign Banks Borrow at the Discount Window during the Crisis?" »

Posted by Blog Author at 10:00 AM in Financial Institutions, Monetary Policy | Permalink | Comments (2)

April 11, 2011

Everything You Wanted to Know about the Tri-Party Repo Market, but Didn't Know to Ask

Lucinda Brickler,* Adam Copeland, and Antoine Martin

The tri-party repo market is a large and important market where securities dealers find short-term funding for a substantial portion of their own and their clients’ assets. The Task Force on Tri-Party Repo Infrastructure (Task Force) noted in its report that “(a)t several points during the financial crisis of 2007-2009, the tri-party repo market took on particular importance in relation to the failures and near-failures of Countrywide Securities, Bear Stearns, and Lehman Brothers.” In this post, we provide an overview of this market and discuss several reforms currently under way designed to improve functioning of the market. A recent New York Fed staff report provides an in-depth description of the market.


Continue reading "Everything You Wanted to Know about the Tri-Party Repo Market, but Didn't Know to Ask" »

Posted by Blog Author at 10:00 AM in Financial Markets | Permalink | Comments (3)

April 08, 2011

Historical Echoes: Money and the Art of War

New York Fed Research Library

An article written in March 1907 (on the cusp of a financial panic, and before the creation of the Federal Reserve) poses the question, “Is there money enough.” The author, F. A. Vanderlip, President of National City Bank (later Citibank), observes that a banking system without a central bank is prone to disorderly “retreats or advances,” with every banker acting for himself and none for the greater good:

Continue reading "Historical Echoes: Money and the Art of War" »

Posted by Blog Author at 10:00 AM in Historical Echoes | Permalink

April 06, 2011

Temporary Layoffs during the Great Recession

Erica L. Groshen

In this post, I show that despite the depth of the Great Recession, U.S. employers did not use temporary layoffs much to cut costs. Just as they did during the previous two recessions, when firms laid workers off, they usually severed ties completely. This prevalence of permanent layoffs during the recession could slow the employment rebound over the coming months. It also raises questions about why the behavior of employers during recessions has changed.

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Posted by Blog Author at 10:00 AM in Labor Economics, Macroecon | Permalink | Comments (2)

April 04, 2011

CoVaR: A Measure of Systemic Risk

Tobias Adrian and Markus K. Brunnermeier*

Wonk alert: technical content
During the 2007-09 financial crisis, we saw that losses spread rapidly across institutions, threatening the entire financial system. Distress spread from structured investment vehicles to traditional deposit-taking banks and on to investment banks, and the failures of individual institutions had outsized impacts on the financial system. These spillovers were realizations of systemic risk—the risk that the distress of an individual institution, or a group of institutions, will induce financial instability on a broader scale, distorting the supply of credit to the real economy. In this post, we draw on our working paper “CoVaR”—issued in the New York Fed’s Staff Reports series—to do two things: first, propose a new measure of systemic risk and, second, outline a method that can help bring about the early detection of systemic risk buildup.

Continue reading "CoVaR: A Measure of Systemic Risk" »

Posted by Blog Author at 10:00 AM in Financial Institutions, Financial Markets | Permalink | Comments (0)

April 01, 2011

Historical Echoes: Tulipomania—One of the Very First Financial Bubbles

New York Fed Research Library


Speculative bubbles have been a recurring theme in financial history. One of the first documented market bubbles occurred in the 1600s and involved a booming (or should we say “blooming”?) tulip market in the Netherlands.

Continue reading "Historical Echoes: Tulipomania—One of the Very First Financial Bubbles" »

Posted by Blog Author at 10:00 AM in Historical Echoes | Permalink

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