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9 posts from December 2012

December 31, 2012

Why Isn’t the Thirty-Year Fixed-Rate Mortgage at 2.6 Percent?

Andreas Fuster and David Lucca

As of mid-December, the average thirty-year fixed-rate mortgage was near its historic low of about 3.3 percent, or half its level in August 2007 when financial turmoil began. However, yield declines in the mortgage-backed-securities (MBS) market, where bundles of mortgage loans are sold to investors, have been even more dramatic. In fact, all else equal, had these declines passed through to loan rates one-for-one, the average mortgage rate would now be around 2.6 percent. In this post, we summarize some of the findings from a workshop held at the New York Fed in early December aimed at better understanding the drivers behind the increased wedge between mortgage loan and MBS rates.

Continue reading "Why Isn’t the Thirty-Year Fixed-Rate Mortgage at 2.6 Percent? " »

Posted by Blog Author at 7:00 AM in Financial Institutions, Housing | Permalink | Comments (8)

December 21, 2012

The Path of Economic Recovery from Superstorm Sandy

Jaison R. Abel, Jason Bram, Richard Deitz, and James Orr

Superstorm Sandy caused damage and disruption to a wide swath of the New York-New Jersey region. The high winds and storm surge resulted in significant physical damage to residential property, commercial real estate, and the power and transportation infrastructure. Everyday activities such as commuting, shopping, and traveling were impeded or in some cases prevented. As a number of communities across the region continue to cope with the damage and ongoing disruptions, there’s concern about if and when activity will return to normal.

Continue reading "The Path of Economic Recovery from Superstorm Sandy" »

Posted by Blog Author at 7:00 AM in Regional Analysis | Permalink | Comments (2)

December 20, 2012

How Will We Pay For Superstorm Sandy?

Jaison R. Abel, Jason Bram, Richard Deitz, and James Orr

While the full extent of the harm caused by superstorm Sandy is still unknown, it’s clear that the region sustained significant damage and disruption, particularly along the coastal areas of New York, New Jersey, and Connecticut. As we describe earlier in this series, the economic costs associated with natural disasters are generally thought to arise from the damage and destruction of physical assets and the loss of economic activity. These costs can be substantial, running into the tens of billions, and impose significant stress on the affected communities. In this post, we assess who will ultimately pay the economic costs imposed by the storm. Based on data from recent hurricane events, it is likely that the federal government and private insurance companies will more than cover the aggregate costs. In the short run, though, there may be strains on state and local governments as well as on individuals and businesses as they await reimbursement.

Continue reading "How Will We Pay For Superstorm Sandy?" »

Posted by Blog Author at 7:00 AM in Regional Analysis | Permalink | Comments (0)

December 19, 2012

The Impact of Superstorm Sandy on New York City School Closures and Attendance

Rajashri Chakrabarti and Max Livingston

On October 29, superstorm Sandy hit the tri-state area, flooding streets, highways, tunnels, buildings, and homes, and crippling the region’s public transit system. At least ninety-four people in New York and New Jersey were killed. Downed power lines and damaged transformers plunged downtown Manhattan and coastal areas into days and weeks of darkness. The damage is still being assessed, but costs are sure to be in the tens of billions. Schools were no exception to this devastation, both in infrastructural damage and in disruptions to students’ education. The storm shut down all 1,750 New York City public schools for a full week, and many remained closed, damaged, or were relocated in the following week. A few schools will not return to their normal locations until 2013. In this post, we analyze the impact of Sandy on New York City schools and assess how the storm might affect students’ educational outcomes.

Continue reading "The Impact of Superstorm Sandy on New York City School Closures and Attendance" »

Posted by Blog Author at 10:25 AM in Regional Analysis | Permalink | Comments (1)

December 18, 2012

The Welfare Costs of Superstorm Sandy

Jaison R. Abel, Jason Bram, Richard Deitz, and James Orr

As most of the New York metropolitan region begins to get back to normal following the devastation caused by superstorm Sandy, researchers and analysts are trying to assess the total “economic cost” of the storm. But what, exactly, is meant by economic cost? Typically, those tallying up the economic cost of a disaster think of two types of costs: loss of capital (property damage and destruction) and loss of economic activity (caused by disruptions). But there is another important type of economic loss that often is not estimated or discussed in policymaking decisions: loss of welfare or deterioration in quality of life. Here we focus on how superstorm Sandy (and other such disasters) can have widespread adverse effects on quality of life, and provide some illustrations of how one can try to put an approximate dollar value on this type of cost.

Continue reading "The Welfare Costs of Superstorm Sandy" »

Posted by Blog Author at 7:00 AM in Corporate Finance, Regional Analysis | Permalink | Comments (0)

December 17, 2012

What Are the Costs of Superstorm Sandy?

Jaison R. Abel, Jason Bram, Richard Deitz, and James Orr

Superstorm Sandy has had widespread effects in the tri-state region. Early estimates of the total national costs have been in the range of $30 billion to $50 billion. More recently, the New York State governor’s office has estimated state costs to be $32.8 billion, while the New Jersey governor’s office has calculated state costs to be $29.5 billion; these figures exclude mitigation costs—money spent to protect against future storms. It is important to remember that such figures incorporate two distinct types of costs: first, direct costs related to the destruction of physical assets, such as buildings, automobiles, bridges, and roads; and second, indirect costs related to the loss of economic activity resulting from the disruption. This post outlines the differences between these two types of costs, and also discusses what these cost measures typically neglect to include.

Continue reading "What Are the Costs of Superstorm Sandy?" »

Posted by Blog Author at 8:46 AM in Regional Analysis | Permalink | Comments (0)

Just Released: December Empire State Manufacturing Survey

Jason Bram and Richard Deitz

Issued this morning, the December 2012 Empire State Manufacturing Survey report suggests that manufacturing activity continued to decline modestly in New York State, with only moderate lingering effects from superstorm Sandy. The headline general business conditions index, which gives a broad reading on overall manufacturing activity for the state, remained negative for a fifth consecutive month. The level of this index has fluctuated between -5 and -10 over the five-month interval, and has changed little since the storm. Specific activity indexes for December were mixed. The measure for new orders dipped below zero but only slightly, while the shipments index remained in positive territory. However, the indexes for both the number of employees and the average workweek were more negative.

Continue reading "Just Released: December Empire State Manufacturing Survey" »

Posted by Blog Author at 8:45 AM in Regional Analysis | Permalink | Comments (0)

December 03, 2012

Why (or Why Not) Keep Paying Interest on Excess Reserves?

Gara Afonso

In the fall of 2008, the Fed added new policy tools to its portfolio of techniques for implementing monetary policy. In particular, since October 9, 2008, depository institutions in the United States have been paid interest on the balances they hold overnight at Federal Reserve Banks (see Federal Reserve Board announcement). Several other central banks, such as the European Central Bank (ECB) and the central banks of Canada, England, and Australia, have somewhat similar deposit facilities allowing banks to earn overnight rates on their balances. In this post, I discuss the benefits and costs of this new tool in an environment where excess reserves in the United States have now exceeded $1.4 trillion and account for close to 95 percent of all reserves.

Continue reading "Why (or Why Not) Keep Paying Interest on Excess Reserves?" »

Posted by Blog Author at 7:02 AM in Financial Institutions, Monetary Policy | Permalink | Comments (0)

Just Released: Money and Payments Workshop Examines Financial Market Structure

Thomas Eisenbach

We’ve recently posted the proceedings of an October 19 Money and Payments Workshop that brought together researchers from central banks and academia as well as practitioners to discuss the importance of financial market structure. The agenda included items hotly debated since the recent financial crisis, including central clearing, over-the-counter markets, “dark pools,” and network structures. The main theme of the workshop was the effect that market structure has on the incentives of the parties involved, the liquidity of the transactions conducted, and the efficiency of the economic outcomes achieved. This post briefly describes the six papers presented.

Continue reading "Just Released: Money and Payments Workshop Examines Financial Market Structure" »

Posted by Blog Author at 7:00 AM in Financial Markets | Permalink | Comments (0)

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