Liberty Street Economics

Look for our next post on Dec. 15, 2023.

December 1, 2023

Recent Disparities in Earnings and Employment

Rajashri Chakrabarti, Kasey Chatterji-Len, Dan Garcia, and Maxim Pinkovskiy

Dectorative image of collage of polaroids of diverse group of people portraits.

The New York Fed recently released its latest set of Equitable Growth Indicators (EGIs). Updated quarterly, the EGIs continue to report demographic and geographic differences in inflation, earnings (real and nominal), employment, and consumer spending (real and nominal) at the national level. This release also launches a set of national wealth EGIs (which will be examined more closely on Liberty Street Economics early next year). Going forward, EGI releases will also include a set of regional EGIs, which will present disparities in inflation, earnings (real and nominal), employment, and consumer spending (real and nominal) in our region. Drawing on the just released EGIs, in this post, we present recent gender gaps in the labor market at the national and regional levels. We provide a picture of how gender wage and employment disparities have evolved since the pandemic, examining and contrasting gaps at the national and regional level. We find that the gaps between the employment rates and earnings of men and women have declined steadily following the pandemic, but have declined perceptibly more so in our region than in the nation.

Posted at 7:00 am in Demographics, Inequality, New Jersey, New York, Regional Analysis, Unemployment | Permalink | Comments (0)

November 30, 2023

FHA First-Time Buyer Homeownership Sustainability: An Update

Donghoon Lee and Joseph Tracy

Young African American heterosexual couple sitting on the steps of a house with front door open and cardboard moving boxes around them.

An important part of the mission of the Federal Housing Administration (FHA) is to provide affordable mortgages that both promote the transition from renting to owning and create “sustainable” homeownership. The FHA has never defined what it means by sustainability. However, we developed a scorecard in 2018 that tracks the long-term outcomes of FHA first-time buyers (FTBs) and update it again in this post. The data show that from 2011 to 2016 roughly
21.8 percent of FHA FTBs failed to sustain their homeownership.

Posted at 7:00 am in Equitable Growth, Household Finance, Housing | Permalink | Comments (0)

November 29, 2023

Treasury Bill Supply and ON RRP Investment

Gara Afonso, Marco Cipriani, Catherine Huang, Gabriele La Spada, and Sergio Olivas

Decorative photo: close up of the words "The Treasury" on the treasury building showing the top of the columns outside the structure.

Take-up at the Federal Reserve’s Overnight Reverse Repo Facility (ON RRP) increased from a few billion dollars in January 2021 to around $2.6 trillion at the end of December 2022. In this post, based on a recent Staff Report, we explain how the supply of U.S. Treasury bills (T-bills) affects the decision of money market mutual funds (MMFs) to invest at the facility. We show that MMFs responded to a reduction in T-bill supply by increasing their take-up at the ON RRP, helping to explain the increased overall take-up.

Posted at 7:00 am in Financial Markets | Permalink | Comments (0)

November 28, 2023

Bond Funds in the Aftermath of SVB’s Collapse

Nicola Cetorelli and Sarah Zebar

Decorative image: Bond market screen with rising yields and interest rates

March 2023 will rightfully be remembered as a period of major turmoil for the U.S. banking industry. In this post, we go beyond banks to analyze how fixed-income, open-end funds (bond funds) fared in the days after the start of the banking crisis. We find that bond funds experienced net outflows each day for almost three weeks after the run on Silicon Valley Bank (SVB), and that these outflows were experienced diffusely across the entire segment. Our preliminary evidence suggests that the outflows from bond funds may have been an unintended consequence of the exceptional measures taken to strengthen the balance sheet of banks during this time.

Posted at 7:00 am in Banks, Financial Markets | Permalink | Comments (0)

November 27, 2023

The Nonbank Shadow of Banks

Nicola Cetorelli and Saketh Prazad

Decorative image: Aerial view of money transfer icon over cityscape

Financial and technological innovation and changes in the macroeconomic environment have led to the growth of nonbank financial institutions (NBFIs), and to the possible displacement of banks in the provision of traditional financial intermediation services (deposit taking, loan making, and facilitation of payments). In this post, we look at the joint evolution of banks—referred to as depository institutions from here on—and nonbanks inside the organizational structure of bank holding companies (BHCs). Using a unique database of the organizational structure of all BHCs ever in existence since the 1970s, we document the evolution of NBFI activities within BHCs. Our evidence suggests that there exist important conglomeration synergies to having both banks and NBFIs under the same organizational umbrella.

Posted at 7:00 am in Banks, Nonbank (NBFI) | Permalink | Comments (0)

November 21, 2023

The New York Fed DSGE Model Perspective on the Lagged Effect of Monetary Policy

Richard Crump, Marco Del Negro, Keshav Dogra, Pranay Gundam, Donggyu Lee, Ramya Nallamotu, and Brian Pacula

Decorative image: Factory workers on an assembly line with baseball caps on.

This post uses the New York Fed DSGE model to ask the question: What would have happened to interest rates, output, and inflation had the Federal Reserve been following an average inflation targeting (AIT)-type reaction function since 2021:Q2, when inflation began to rise—as opposed to keeping the federal funds rate at the zero lower bound (ZLB) until March 2022, and then raising it aggressively thereafter? We show that actual policy was more accommodative in 2021 than implied by the AIT reaction function and then more contractionary in 2022 and beyond. On net, the lagged effect of monetary policy on the level of GDP, when measured relative to the counterfactual, has been positive throughout the forecast horizon, due to the initial boost associated with keeping the fed funds rate near zero in 2021.

Posted at 7:01 am in DSGE, Monetary Policy | Permalink | Comments (0)

A Bayesian VAR Model Perspective on the Lagged Effect of Monetary Policy

Richard Crump, Marco Del Negro, Keshav Dogra, Pranay Gundam, Donggyu Lee, Ramya Nallamotu, and Brian Pacula

Over the last few years, the U.S. economy has experienced unusually high inflation and an unprecedented pace of monetary policy tightening. While inflation has fallen recently, it remains above target, and the economy continues to expand at a robust pace. Does the resilience of the U.S. economy imply that monetary policy has been ineffectual? Or does it reflect that policy acts with “long and variable lags” and so we haven’t yet observed the full effect of the monetary tightening that has already taken place? Using a Bayesian vector autoregressive (BVAR) model, we show that economic activity has, indeed, been substantially stronger than would have been anticipated considering the rapid policy tightening. Still, the model expects a significant slowdown in 2024-25, even though short-term interest rates are forecasted to fall.

Posted at 7:00 am in Forecasting, Macroeconomics, Monetary Policy | Permalink | Comments (0)

November 20, 2023

Banks versus Hurricanes

Peter Anagnostakos, Jason Bram, Benjamin Chan, Natalia Fischl-Lanzoni, Hasan Latif, James M. Mahoney, Don Morgan, Ladd Morgan, and Ivelisse Suarez

Woman looking over the debris left by hurricane of her home in Puerto Rico.

The impacts of hurricanes analyzed in the previous post in this series may be far-reaching in the Second District. In a new Staff Report, we study how banks in Puerto Rico fared after Hurricane Maria struck the island on September 17, 2017. Maria makes a worst case in some respects because the economy and banks there were vulnerable beforehand, and because Maria struck just two weeks after Hurricane Irma flooded the island. Despite the immense destruction and disruption Maria caused, we find that the island’s economy and banks recovered surprisingly quickly. We discuss the various protections—including homeowners’ insurance, federal aid, and mortgage guarantees—that helped buttress the island’s economy and banks.

Posted at 7:00 am in Banks, Climate Change | Permalink | Comments (0)

November 17, 2023

Flood-Prone Basement Housing in New York City and the Impact on Low- and Moderate-Income Renters

Claire Kramer Mills, Ambika Nair, and Julian di Giovanni

Decorative image: Man in front of a house with belongings from flood damage.

Hurricane Ida, which struck New York in early September 2021, exposed the region’s vulnerability to extreme rainfall and inland flooding. The storm created massive damage to the housing stock, particularly low-lying units. This post measures the storm’s impact on basement housing stock and, following the focus on more-at-risk populations from the two previous entries in this series, analyzes the attendant impact on low-income and immigrant populations. We find that basements in select census tracts are at high risk of flooding, affecting an estimated 10 percent of low-income and immigrant New Yorkers.

Posted at 7:00 am in Climate Change, Inequality, New York | Permalink | Comments (0)

November 16, 2023

Small Business Recovery after Natural Disasters in the Fed’s Second District

Asani Sarkar

A previous Liberty Street Economics post found that minority-owned small businesses in the Federal Reserve’s Second District have been particularly vulnerable to natural disasters. Here we focus on the aftermath of disasters (such as hurricanes, floods, wildfires, droughts, and winter storms) and examine disparities in the ability of these firms to reopen their businesses and access disaster relief. Our results indicate that while white- and minority-owned firms remain closed for similar durations, the latter are more reliant on external funding from government and private sources to cope with disaster losses.

Posted at 7:00 am in Climate Change, Inequality, New Jersey, New York | Permalink | Comments (0)

Markets & Policy Implementation

Liberty Street Economics

Recent Disparities in Earnings and Employment

FHA First-Time Buyer Homeownership Sustainability: An Update

Treasury Bill Supply and ON RRP Investment

Bond Funds in the Aftermath of SVB’s Collapse

The Nonbank Shadow of Banks

The New York Fed DSGE Model Perspective on the Lagged Effect of Monetary Policy

A Bayesian VAR Model Perspective on the Lagged Effect of Monetary Policy

Banks versus Hurricanes

Flood-Prone Basement Housing in New York City and the Impact on Low- and Moderate-Income Renters

Small Business Recovery after Natural Disasters in the Fed’s Second District

Economic Inequality

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