Liberty Street Economics
February 04, 2015

Household Formation within the “Boomerang Generation”



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Young Americans’ living arrangements have changed strikingly over the past fifteen years, with recent cohorts entering the housing market at much lower rates and lingering much longer in their parents’ households. The New York Times Magazine reported this past summer on the surge in college-educated young people who “boomerang” back to living with their parents after graduation. Joining that trend are the many other members of this cohort who have never left home, whether or not they attend college. Why might young people increasingly reside with their parents? They may be unable to find employment, they may be saving their income to pay down increasing levels of student debt, or they may be unable to afford the rent for an apartment in the face of lower income or higher housing prices.

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

February 02, 2015

Bank Capital and Risk: Cautionary or Precautionary?



Bank Capital and Risk: Cautionary or Precautionary

Do riskier banks have more capital? Banking companies with more equity capital are better protected against failure, all else equal, because they can absorb more losses before becoming insolvent. As a result, banks with riskier income and assets would hopefully choose to fund themselves with relatively more equity and less debt, giving them a larger equity cushion against potential losses. In this post, we use a top-down stress test model of the U.S. banking system—the Capital and Loss Assessment under Stress Scenarios (CLASS) model—to assess whether banks that are forecast to lose capital in a severe downturn do indeed have more capital, and how the relationship between capital and risk has evolved over time.

Posted by Blog Author at 7:00 AM in Financial Institutions | Permalink | Comments ( 1 )

January 16, 2015

Just Released: January Business Leaders Survey Indicates Regional Business Conditions Are Finally Back to Normal



The New York Fed’s January Business Leaders Survey indicates that the regional economy kicked off the New Year on a positive note. This monthly survey—which covers firms in the service sector in New York State, northern New Jersey, and southwestern Connecticut—dates back to 2004, and this month marks the one-year anniversary of its public release. In addition to showing a solid increase in regional economic activity, employment, and wages, January’s survey signals that the regional economy has reached an important milestone: firms are saying that business conditions are finally back to normal for the first time since before the Great Recession.

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

Historical Echoes: The World of Bank Names, According to Andy Rooney



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Did’ya ever notice how silly those Historical Echoes posts can get? Andy Rooney passed in November 2011 (see the New York Times obituary and the obituary from CBS), so he missed his chance to comment on the Liberty Street Economics blog (although here’s a guy pretending to be Mr. Rooney talking about blogs). But while he was alive he sure had a lot of funny and insightful things to say on a lot of topics, including bank names.

Posted by Blog Author at 7:00 AM in Historical Echoes | Permalink | Comments ( 3 )

January 14, 2015

FRN Follow-Up: Who Are the Market Participants?



On January 29, 2014, the U.S. Treasury held its first auction of a two-year floating-rate note (FRN), which pays a fixed spread over the floating thirteen-week bill rate rather than a fixed coupon. In this post, we investigate the aftermath of the January auction and highlight the important role played by dealers as intermediaries and by money market funds as ultimate investors. For more details on the FRN terms, please see our previous post, which offered an introduction to FRNs.

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

January 12, 2015

Hybrid Intermediaries



A successful hybrid is an offspring of two species that, in a new environment, is better suited for survival than its own parents. Evolution in the financial “ecosystem” seems to have driven the emergence of hybrid intermediaries.

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

January 09, 2015

Historical Echoes: Metaphors for Monetary Policy and Some GMAT Nostalgia




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Metaphors, similes, analogies—we know they’re not the same thing, but they can do pretty much the same job when illustrating what monetary policy is like (or what anything is like). Here are a few such monetary policy comparisons from some notable economists and commentators. For some reason, they all seem to involve physics. More exist, of course.

     Note that monetary policy encompasses a range of concerns, not just a single issue. Therefore, the metaphors and analogies illustrate different phenomena.


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

January 07, 2015

What Does Disagreement Tell Us about Uncertainty?



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Uncertainty is of considerable interest for understanding the behavior of individuals as well as the movements in key macroeconomic and financial variables. Despite its importance, direct measures of uncertainty aren’t widely available. Because of this data limitation, a common practice is to use survey-based measures of forecast dispersion—reflecting disagreement among respondents—to proxy for uncertainty. Is this a reliable practice? Here, we review the distinction between disagreement and uncertainty as concepts, and show that this conceptual distinction carries over to their empirical counterparts, suggesting that disagreement is not generally a good proxy for uncertainty.

Posted by Blog Author at 7:00 AM in Education , Macroecon | Permalink | Comments ( 3 )

January 05, 2015

Worker Flows in Banking Regulation



In the aftermath of the 2008 financial crisis, job transitions of personnel in banking supervision and regulation between the public and private sectors—often labeled the revolving door—have come under intense scrutiny and have been blamed by certain economists (Johnson and Kwak), legal scholars (John Coffee in the Financial Times), and policymakers (Dodd-Frank Act of 2010, Section 968) for distorting regulators’ actions in favor of banks. However, other commentators have downplayed these distortions and presented a more benign viewpoint of these worker flows—as a means for regulatory agencies to attract higher-ability and skilled workers. Because data on job transitions in banking regulatory agencies are scarce, these discussions are mostly informed by anecdotes. Our recent paper brings more rigor to this debate by contributing a first set of stylized facts based on data related to incidence and drivers of worker flows in U.S. banking regulation. Our data show clear evidence of higher worker inflows to the regulatory sector during bad economic conditions. When we study worker flows as a function of an enforcement proxy, we find evidence to be inconsistent with the often-cited “quid-pro-quo” hypothesis. We instead posit an alternative “regulatory schooling” hypothesis that may better explain the empirical evidence.
Posted by Blog Author at 7:00 AM in Corporate Finance | Permalink | Comments ( 0 )

January 02, 2015

Historical Echoes: The Demise of Silver Certificates



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On June 24, 1968, thousands of people swarmed assay offices in the United States, anxious to unload their holdings of silver certificates. The U.S. Treasury had deemed this the final date on which the certificates could be exchanged for silver bullion. People camped out overnight to ensure that they would beat the deadline, and the resulting lines stretched for hours. Life Magazine covered the story, and offered a history of silver certificates in the United States.

Posted by Blog Author at 11:04 AM in Historical Echoes | Permalink | Comments ( 0 )

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Liberty Street Economics features insight and analysis from economists working at the intersection of research and Fed policymaking.

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