Liberty Street Economics
Liberty Street Economics
Look for our next post on December 15.
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.

September 26, 2017

The Treasury Market Practices Group: A Consequential First Decade



LSE_2017_The Treasury Market Practices Group: A Consequential First Decade

The Treasury Market Practices Group (TMPG) was formed in February 2007 in response to the appearance of some questionable trading practices in the secondary market for U.S. Treasury securities. (A history of the origins of the TMPG is available here.) Left unaddressed, the practices threatened to harm the efficiency and integrity of an essential global benchmark market. The Group responded by identifying and publicizing “best practices” in trading Treasury securities—a statement of behavioral norms intended to maintain a level and competitive playing field for all market participants. The Group’s focus expanded in 2008 to include market architecture issues, and again in 2010 to include the federal agency debt and mortgage-backed securities (MBS) markets.

Posted by Blog Author at 7:00 AM in Regulation , Treasury | Permalink | Comments ( 0 )

September 25, 2017

Why Pay Interest on Required Reserve Balances?



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The Federal Reserve has paid interest on reserves held by banks in their Fed accounts since 2008. Why should it do so? Here, we describe some benefits of paying interest on required reserve balances. Since forcing banks to hold unremunerated reserves would be akin to levying a tax on them, paying interest on these balances is a way to eliminate or greatly reduce that tax and its negative effects.

September 22, 2017

Just Released: A Monthly Underlying Inflation Gauge



LSE_Just Released: A Monthly Underlying Inflation Gauge

Today marks the launch of the monthly publication of the Underlying Inflation Gauge (UIG). We are reporting two UIG measures, described recently on Liberty Street Economics, that are constructed to provide an estimate of the trend, or persistent, component of inflation. One measure is derived using a large number of disaggregated price series in the consumer price index (CPI), while the second measure incorporates additional information from macroeconomic and financial variables.

September 08, 2017

The New York Fed DSGE Model Forecast—August 2017



This post presents our quarterly update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since May 2017.

September 06, 2017

What Drives International Bank Credit?



LSE_2017_What Drives International Bank Credit?

A major question facing policymakers is how to deal with slumps in bank credit. The policy prescriptions are very different depending on whether the decline is a result of global forces, domestic demand, or supply problems in a particular banking system. We present findings from new research that exactly decompose the growth in banks’ aggregate foreign credit into these three factors. Using global banking data for the period 2000-16, we uncover some striking patterns in bilateral credit relationships between consolidated banking systems and borrowers in more than 200 countries. The most important we term the “Anna Karenina Principle” of global banking: all healthy credit relationships behave alike; each unhealthy credit relationship is unhealthy in its own way.

August 23, 2017

At the New York Fed: The Appropriate Government Role in U.S. Mortgage Markets



While the U.S. mortgage finance system was at the center of the recent financial crisis, it remains largely untouched by legislative reforms. At the center of these conversations are Fannie Mae and Freddie Mac—both of which were placed into federal conservatorship in September 2008. Now, nearly nine years later, the fate of these two government-sponsored enterprises (GSEs) and the prospect of related changes to the mortgage finance system are once again a focus of policy discussion. In this post, we summarize the main themes of a recent New York Fed workshop where policymakers, academics, and practitioners gathered to consider the future structure of the U.S. housing finance system.

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

August 21, 2017

Just Released: Introducing the SCE Labor Market Survey



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The New York Fed for the first time released its Survey of Consumer Expectations (SCE) Labor Market Survey which focuses on individuals’ experiences and expectations in the labor market. These data have been collected every four months since March 2014 as part of the SCE. It is being introduced now because the module has enough historical data to reveal notable trends. In this post we introduce the SCE Labor Market Survey and highlight some of its features.

August 18, 2017

“Hey, Economist!” How Was Your Ph.D. Internship?

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This week, four Ph.D. students in economics and finance are wrapping up their summer internships at the New York Fed’s Research Department. The ten-week internships—which are compensated—offer interns the opportunity to further their dissertation research, interact with the Bank’s research economists, and give informal, “brown bag” lunch seminars to hear feedback on their work.

August 16, 2017

Counterparty and Collateral Policies of Central Bank Lending Facilities



Editor’s note: When this post was first published there was an omission in text; text has been restored. (August 16, 2017, 9:05 a.m.)

LSE_Counterparty and Collateral Policies of Central Bank Lending Facilities

In a previous post, we compared the Federal Reserve’s discount window with the standing lending facilities (SLFs) at the Bank of England (BoE), the European Central Bank (ECB), and the Bank of Japan (BoJ). We showed that the Fed’s discount window was less integrated with monetary policy than the SLFs of the other central banks. In this post, we observe that the counterparty and collateral policies of the Fed’s discount window are similarly less integrated with the practices involved in monetary policy operations, in comparison with the other central banks.

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

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 Donald Morgan, 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.


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