Liberty Street Economics   Liberty Street Economics
Liberty Street Economics
Return to Liberty Street Economics Home Page

17 posts on "Federal Reserve"

October 15, 2018

Did Banks Subject to LCR Reduce Liquidity Creation?



LSE_2018_Did Banks Subject to LCR Reduce Liquidity Creation?

Banks traditionally provide loans that are funded mostly by deposits and thereby create liquidity, which benefits the economy. However, since the loans are typically long-term and illiquid, whereas the deposits are short-term and liquid, this creation of liquidity entails risk for the bank because of the possibility that depositors may “run” (that is, withdraw their deposits on short notice). To mitigate this risk, regulators implemented the liquidity coverage ratio (LCR) following the financial crisis of 2007-08, mandating banks to hold a buffer of liquid assets. A side effect of the regulation, however, is a reduction in liquidity creation by banks subject to LCR, as we find in our recent paper.

Continue reading "Did Banks Subject to LCR Reduce Liquidity Creation?" »

August 08, 2018

How Do the Fed’s MBS Holdings Affect the Economy?



LSE_How Do the Fed’s MBS Holdings Affect the Economy?

In our previous post, we discussed the meaning of the term “credit allocation” and how it relates to the Federal Reserve’s holdings of agency mortgage-backed securities (MBS). We concluded that the Fed’s MBS holdings do not pose significant credit risk but that the Fed does influence the relative market price of credit when it purchases agency MBS, and this indirectly influences decisions by investors. Today, we take the next step and discuss how the Fed’s MBS purchases affect the U.S. economy and, in particular, how the effect of MBS purchases can differ from the effect of purchases of Treasury securities.

Continue reading "How Do the Fed’s MBS Holdings Affect the Economy?" »

Posted by Blog Author at 7:00 AM in Bank Capital, Federal Reserve, Monetary Policy | Permalink | Comments (2)

August 06, 2018

How Do the Fed's MBS Purchases Affect Credit Allocation?



LSE_How Do the Fed's MBS Purchases Affect Credit Allocation?

It is sometimes said that the Federal Reserve should not engage in “credit allocation.” But what does credit allocation actually mean? And how do current Fed policies affect the allocation of credit? In this post, we describe two separate ideas often associated with credit allocation. The first idea is that the Fed should not take credit risk, which taxpayers would ultimately have to bear. The second idea is that the Fed’s actions should not influence the flow of credit to particular sectors. We consider whether the Fed’s holdings of agency mortgage-backed securities (MBS) could affect the allocation of credit. In a companion post, we discuss how the economic effects of the Fed’s MBS holdings compare with the economic effects of more traditional holdings.

Continue reading "How Do the Fed's MBS Purchases Affect Credit Allocation?" »

Posted by Blog Author at 7:00 AM in Central Bank, Federal Reserve, Monetary Policy | Permalink | Comments (0)

June 01, 2018

Hey, Economist! Outgoing New York Fed President Bill Dudley on FOMC Preparation and Thinking Like an Economist

LSE_2018.06.01-LSE-Dudley_920x576

Bill Dudley will soon turn over the keys to the vault—so to speak. But before his tenure ends after nine years as president of the New York Fed, Liberty Street Economics sought to capture his parting reflections on economic research, FOMC preparation, and leadership. Publications editor Trevor Delaney recently caught up with Dudley. This transcript has been lightly edited.

Continue reading "Hey, Economist! Outgoing New York Fed President Bill Dudley on FOMC Preparation and Thinking Like an Economist" »

Posted by Blog Author at 7:00 AM in Banks, Federal Reserve, Hey, Economist!, Monetary Policy | Permalink | Comments (0)

January 10, 2018

The ‘Banking Desert’ Mirage



LSE_The ‘Banking Desert’ Mirage

Unbanked households are often imagined to live in urban neighborhoods devoid of banks, but is that really the case? Our map of U.S. banking deserts reveals that most are not in urban areas, where financial exclusion may be endemic, but in actual deserts—largely in the sparsely populated, rural West. Across states, we find that the share of the population in a banking desert is unrelated to the share that is unbanked. If distance from a bank is not what causes financial exclusion, then motivating banks to locate closer to the unbanked may not promote financial inclusion.

Continue reading "The ‘Banking Desert’ Mirage" »

Posted by Blog Author at 7:00 AM in Federal Reserve, Financial Intermediation | Permalink | Comments (4)

January 09, 2018

Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization



LSE_Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization

In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.

Continue reading "Fiscal Implications of the Federal Reserve’s Balance Sheet Normalization" »

Posted by Blog Author at 7:00 AM in Federal Reserve, Monetary Policy | Permalink | Comments (0)

December 20, 2017

The Fed’s Balance Sheet, Night Lights, and the Other Top LSE Posts of 2017



LSE_The Fed’s Balance Sheet, Night Lights, and the Other Top LSE Posts of 2017

In the spirit of this season of year-end lists of accomplishments, Liberty Street Economics offers a roundup of our most viewed posts. Our readers continued to gravitate toward timely, topical posts; our most popular explained how the Fed manages its enlarged balance sheet—a major focus of the FOMC, Congress, markets, and economists. Prompted by reader questions in response to their first post, the authors also penned a follow-up post. Another hit this year described an innovative indicator of economic growth—night light intensity measured via satellite—and used it to fact-check official Chinese growth estimates.

Continue reading "The Fed’s Balance Sheet, Night Lights, and the Other Top LSE Posts of 2017" »

Posted by Blog Author at 7:00 AM in Federal Reserve, Household Finance | Permalink | Comments (0)

October 12, 2017

Just Released: New York Fed Markets Data Dashboard



LSE_2017_http://libertystreeteconomics.newyorkfed.org/2017/10/just-released-new-york-fed-markets-data-dashboard.html

The Federal Reserve Bank of New York releases data on a number of market operations, reference rates, monetary policy expectations, and Federal Reserve securities portfolio holdings. These data are released at different times, for different types of securities or rates, and for different audiences. In an effort to bring this information together in a single, convenient location, the New York Fed developed the Markets Data Dashboard, which was launched today.

Continue reading "Just Released: New York Fed Markets Data Dashboard" »

Posted by Blog Author at 10:00 AM in Federal Reserve, Financial Markets, Monetary Policy, Repo | Permalink | Comments (0)

September 29, 2017

Hey, Economist! Tell Us about Your First Year as Research Director of the New York Fed



LSE_2017_qa-hirtle_delaney_460

A year has passed since Beverly Hirtle was named director of research for the Federal Reserve Bank of New York. Before assuming that position, Bev played many roles at the Bank over the last thirty years, including serving as the deputy chair of the Federal Reserve Model Oversight Group responsible for designing and implementing the Comprehensive Capital Analysis and Review and Dodd-Frank Act stress tests. But what was it like to become the head of the Research and Statistics Group and director of research? Hirtle offers some insight into her latest role.

Continue reading "Hey, Economist! Tell Us about Your First Year as Research Director of the New York Fed" »

Posted by Blog Author at 7:00 AM in Federal Reserve, Hey, Economist! | Permalink | Comments (0)

September 27, 2017

Why Pay Interest on Excess Reserve Balances?



LSE_2017_Why Pay Interest on Excess Reserve Balances?

In a previous post, we described some reasons why it is beneficial to pay interest on required reserve balances. Here we turn to arguments in favor of paying interest on excess reserve balances. Former Federal Reserve Chairman Ben Bernanke and former Vice Chairman Donald Kohn recently discussed many potential benefits of paying interest on excess reserve balances and some common misunderstandings, including that paying interest on reserves restricts bank lending and provides a subsidy to banks. In this post, we focus primarily on benefits related to the efficiency of the payment system and the reduction in the need for the provision of credit by the Fed when operating in a framework of abundant reserves.

Continue reading "Why Pay Interest on Excess Reserve Balances?" »

Posted by Blog Author at 7:00 AM in Central Bank, Federal Reserve, Monetary Policy | Permalink | Comments (1)
About the Blog
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.


Economic Research Tracker

Liberty Street Economics is now available on the iPhone® and iPad® and can be customized by economic research topic or economist.


Most Viewed

Last 12 Months
Useful Links
Comment Guidelines
We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:
Please be brief: Comments are limited to 1500 characters.
Please be quick: Comments submitted after COB on Friday will not be published until Monday morning.
Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.
Please be on-topic and patient: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post. We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will not be posted.‎
Disclosure Policy
The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.
Archives