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12 posts from July 2015

July 20, 2015

Just Released: The U.S. Treasury Market on October 15, 2014



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The $12.7 trillion U.S. Treasury market plays a critical role in the global economy, serving as the primary means of financing the U.S. government, a risk-free benchmark for other financial instruments, and a key venue for the Federal Reserve’s implementation of monetary policy. On October 15, 2014, the market experienced unusually high volatility, record trading volume, and a rapid “round-trip” in prices without a clear cause. In a recently released report, staff of the U.S. Treasury, the Federal Reserve Board, the New York Fed, the SEC, and the CFTC examine the events of that day. This preliminary report provides the most thorough analysis to date of the events that day and serves as a foundation for future analysis of Treasury market functioning and structure.

Continue reading "Just Released: The U.S. Treasury Market on October 15, 2014" »

Posted by Blog Author at 7:00 AM in Financial Markets, Regulation, Treasury | Permalink | Comments (4)

Have Dealers' Strategies in the GCF Repo© Market Changed?



In a previous post, “Mapping and Sizing the U.S. Repo Market,” our colleagues described the structure of the U.S. repurchase agreement (repo) market. In this post, we consider whether recent regulatory changes have changed the behavior of securities broker-dealers, who play a significant role in repo markets. We focus on the General Collateral Finance (GCF) Repo market, an interdealer market primarily using U.S. Treasury and agency securities as collateral. We find that some dealers use GCF Repo as a substantial source of funding for their inventories, while others primarily use GCF Repo to fine-tune their repo positions. Recent regulatory changes, such as the supplementary leverage ratio (SLR), may be contributing to reduced lending in the GCF Repo market.

Continue reading "Have Dealers' Strategies in the GCF Repo© Market Changed?" »

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

July 17, 2015

The Effect of the Strong Dollar on U.S. Growth



Correction: This post was updated on July 17 to replace the term “export volumes” with “real export values.” Although the terms are often used interchangeably, the term “real export values” is deemed more precise. We have updated the post accordingly.

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The recent strengthening of the U.S. dollar has raised concerns about its impact on U.S. GDP growth. The U.S. dollar has appreciated around 12 percent since mid-2014, rising against almost all of our trading partners, with the largest gains against Japan, Mexico, Canada, and the euro area. There was far less movement against newly industrial Asian economies and hardly any change against China. In this blog, we ask how the strength of the dollar affects U.S. GDP growth. Although the dollar can impact the U.S. growth through a number of different channels, we focus on the direct impact through the U.S. trade balance. Our analysis shows that a 10 percent appreciation in one quarter shaves 0.5 percentage point off GDP growth over one year and an additional 0.2 percentage point in the following year if the strength of the dollar persists.


Continue reading "The Effect of the Strong Dollar on U.S. Growth" »

Posted by Blog Author at 7:00 AM in Exchange Rates, Exports, International Economics | Permalink | Comments (2)

July 15, 2015

A Discussion of Thomas Piketty’s Capital in the Twenty-First Century: Does More Capital Increase Inequality?



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Second in a two-part series


My aim in the second post of this series on Thomas Piketty’s Capital in the Twenty-First Century is to talk about the economist’s research accomplishment in reconstructing capital-output ratios for developed countries from the Industrial Revolution to the present and using them to explain why wealth inequality will rise in developed countries. I will then provide a critical discussion of his interpretation of the history of capital in the developed world. Finally, I’ll end by discussing Piketty’s main policy proposal: the global tax on capital.

Continue reading "A Discussion of Thomas Piketty’s Capital in the Twenty-First Century: Does More Capital Increase Inequality?" »

Posted by Blog Author at 7:00 AM in Economic History, Housing, Inequality, Macroecon | Permalink | Comments (0)

July 14, 2015

Historical Echoes: The Woman Who Would Be Bank



LSE_2015_he-woman-roebling-200_art Mary Roebling (1904-94) was the first woman to serve as president of a major U.S.  bank. (She was also the first woman governor of the American Stock Exchange, among numerous other honors.) According to a New York Times obituary, she came into her position through a combination of happenstance and preparation:

Continue reading "Historical Echoes: The Woman Who Would Be Bank" »

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

July 13, 2015

The Survey of Consumer Expectations Turns Two!



Survey of Consumer Expectations

The Federal Reserve Bank of New York’s Survey of Consumer Expectations (SCE) turned two years old in June. In this post, we review some of the key findings from the first two years of the survey’s history, highlighting the most noteworthy trends revealed in the data.

Continue reading "The Survey of Consumer Expectations Turns Two!" »

Posted by Blog Author at 11:00 AM in Expectations, Household Finance, Inflation, Labor Economics, Wages | Permalink | Comments (0)

A Discussion of Thomas Piketty’s Capital in the Twenty-First Century: By How Much Is r Greater than g?



First in a two-part series

Thomas Piketty’s 2014 book Capital in the Twenty-First Century may have been a greater sensation upon publication than Karl Marx’s nineteenth-century Das Kapital. It made the New York Times bestseller list, generated myriad reviews and responses from economists at top institutions, and was the subject of a standing-room-only session at the recent American Economic Association annual meeting. In Capital, Piketty argues that wealth inequality is set to rise from its relatively low levels in the 1950s through the 1970s to the very high levels it once occupied at the dawn of the Industrial Revolution—the time of the heroes of Jane Austen and Honoré de Balzac. He supports this argument with voluminous evidence on the history of the capital stock and of inequality in developed countries, which he argues have been moving in ways consistent with his theory. Piketty proposes that governments worldwide intervene to prevent this rise in inequality, most importantly by levying a global tax on capital.

Continue reading "A Discussion of Thomas Piketty’s Capital in the Twenty-First Century: By How Much Is r Greater than g?" »

Posted by Blog Author at 7:00 AM in Economic History, Inequality, Macroecon | Permalink | Comments (0)

July 10, 2015

Historical Echoes: The Year of the . . . Pigeon?



Correction: In the original version of this post, a quote from the Museum of American Finance website stated that the telegraph arrived in the 1950s. This actually took place in the 1850s. The museum has now revised its site to reflect the correct year and we have revised the relevant text in our post. We regret the error.
carrier pigeon

One could say that Sesame Street character Bert’s extreme interest in paper clips is misguided, but his obsession with pigeons? Maybe not so much. Pigeons have played a role in financial history, with one such role described by Tony Chen during his walking tour of the Hutong district in Beijing. When his group of tourists reaches the Qianshi hutong (see video), he gives an almost unbelievable account of pigeons, exchange rates, and bank robbers during the Ming dynasty, as reported in Time Out Beijing:  

Continue reading "Historical Echoes: The Year of the . . . Pigeon?" »

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

July 08, 2015

How Sensitive Is Housing Demand to Down Payment Requirements and Mortgage Rates?



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When a household is looking to buy a home, financial considerations are usually very important. In particular, in deciding “how much house to buy,” a household must ponder how large a down payment it can make at the time of purchase, and also how much it can afford to pay each month. The minimum required down payment and the interest rate on available mortgages (which determines the monthly payment) are key elements in the decision. When these variables change, this likely affects the price a household is willing and able to pay for a home, and thus the housing market overall. However, measuring the strength of these effects is notoriously difficult. In this post, which is based on a recent staff report, we describe a novel approach to measure these effects. We find that a change in down payment requirements tends to have a large effect on housing demand—households’ willingness to pay for a given home—especially for current renters, whereas the effects of a change in the mortgage rate are modest.


Continue reading "How Sensitive Is Housing Demand to Down Payment Requirements and Mortgage Rates? " »

Posted by Blog Author at 7:00 AM in Household Finance, Housing, Inflation | Permalink | Comments (1)

July 06, 2015

Will Silicon Alley Be the Next Silicon Valley?



Update: We broadened our definition of Silicon Valley and present more complete data on that region’s trends in the comments section of this post. In the body of the piece, we also corrected the NAICS code for Scientific R&D Services.

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For at least the past few decades, New York City’s economy, both its booms and busts, have been driven primarily by the finance sector, or more specifically the securities industry (a.k.a. Wall Street). In contrast, the city’s current economic boom—one of the strongest on record—has seen virtually no job growth on Wall Street. Much of the job creation has been in lower-paying sectors like retail trade, restaurants and hotels, and health care and social assistance, with some of the fastest job growth going on in what would be considered “information technology” industries—jobs that pay quite well for the most part. But how big is the Big Apple’s “tech sector,” how fast has it been growing, and how does it stack up against other tech hubs across the United States? Before addressing these questions, we must first answer a more fundamental question: what exactly is the tech sector?

Continue reading "Will Silicon Alley Be the Next Silicon Valley?" »

Posted by Blog Author at 7:00 AM in Regional Analysis | Permalink | Comments (5)

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