Richard K. Crump, Stefano Eusepi, David O. Lucca, and Emanuel Moench

The growth rate in real gross domestic product (GDP) is a conventional indicator of the economy’s health. But the two ways of measuring annual GDP growth can give very different answers. In 2013, GDP grew 2.2 percent on a year-over-year basis, but at a faster 3.1 percent rate on a Q4-over-Q4 basis. So, which measure is more meaningful? We show in this post that the Q4/Q4 metric is better since it only considers quarterly growth rates during the current year, while the Year/Year measure depends on quarterly growth rates in both the current and previous year and puts considerable weight on growth around the turn of the year.

Or Shachar

Last year, IntercontinentalExchange (ICE) launched a credit default swap index futures contract. In the first two weeks there were spurts of interest in it, but soon it became evident that the new product was unable to generate sufficient demand. Given their short life span in the credit default swaps (CDS) market, the question becomes why were these futures contracts launched in the first place? And, assuming that they were created in response to a real need of market participants, will we see a revival of swap futures in the future?

Michael Gedal, Stephanie Rosoff, and Joelle Scally

The New York Fed has released a new product—the Household Debt and Credit Report for the Second District—which tracks consumer credit conditions in the tri-state area. Our readers are already familiar with our Quarterly Report on Household Debt and Credit, which primarily tracks credit measures—including balances, delinquencies, and new originations—aggregated to the national level. This report will provide a detailed examination of borrowing and repayment behavior on an ongoing basis for New York, New Jersey, and Connecticut, and each of the five boroughs of New York City. It is based on the New York Fed’s Consumer Credit Panel (CCP), a 5 percent representative sample of credit reports from Equifax. In this post, we highlight selected findings from these new regional profiles.

Megan Cohen



From 1793 until 1861, when the U. S. Treasury Department was given exclusive rights to produce legal tender, thousands of different styles of bank notes were created by U.S. banks. The banks all based their currencies on standardized units, but in most every other way the notes differed wildly—colorful versus monochromatic, and graphics ranging from stock images to almost any concept one could imagine.

Jan J.J. Groen

Global asset market developments during the summer of 2013 have been attributed to changes in the outlook for U.S. monetary policy, starting with former Chairman Bernanke’s May 22 comments concerning future curtailing of the Federal Reserve’s asset purchase programs. A previous post found that the signal of a possible change in U.S. monetary policy coincided with an increase in global risk aversion which put downward pressure on global asset prices. This post revisits this episode by measuring the impact of changes in Fed’s expected policy rate path and in the economic outlook on the U.S. dollar and emerging market equity prices. The analysis suggests that changes in the U.S. and foreign outlooks had a meaningful role in explaining global asset price movements during the so-called taper tantrum.

Richard K. Crump, Emanuel Moench, William O'Boyle, Matthew Raskin, Carlo Rosa, and Lisa Stowe



Market prices provide timely information on policy expectations. But as we emphasized in our previous post, they can deviate from investors’ expectations of the most likely path because they embed risk premiums and represent probability-weighted averages over different possible paths. In contrast, surveys explicitly ask respondents for their views on the likely path of economic variables. In this post, we highlight two surveys conducted by the Federal Reserve Bank of New York that provide information about expectations that can complement market-based measures.

Richard K. Crump, Emanuel Moench, William O'Boyle, Matthew Raskin, Carlo Rosa, and Lisa Stowe

Market expectations of the path of future policy rates can have important implications for financial markets and the economy. Because interest rate derivatives enable market participants to hedge against or speculate on potential changes in various short-term U.S. interest rates, they are a rich and timely source of information on market expectations. In this post, we describe how information about market expectations can be derived from interest rate futures and forwards, focusing on three main instruments: federal funds futures, overnight index swaps (OIS), and Eurodollar futures. We also discuss how options on interest rate futures can be used to gain insight into the full distribution of rate expectations—information that cannot be gleaned from futures or forwards alone. In a forthcoming companion post, we explore an alternative source of policy rate expectations based on the two surveys conducted by the Trading Desk at the Federal Reserve Bank of New York.

James Narron, David R. Skeie, and Donald P. Morgan

Authors’ Update: Murray Rothbard’s The Panic of 1819: Reactions and Policies was an additional source for this post and should have been cited. We regret the omission.





As we noted in our last post on the British crisis of 1816, while Britain emerged from nearly a quarter century of war with France ready to supply the world with manufactured goods, it needed cotton to supply the mills, and all of Europe needed wheat to supplement a series of poor harvests. The United States met that demand for cotton and wheat by expanding agricultural production, facilitated by the loose credit policies of a growing number of lightly regulated state banks. Meanwhile, the Treasury needed revenue to pay off debts from the Louisiana Purchase and the War of 1812, so the government turned to selling land acquired in the Louisiana Purchase. But the increased agricultural demand and easy credit policies led to a speculative real estate boom, particularly in Alabama. So when the Treasury started to pay off its debts, the specie drain caused a painful but necessary contraction and the boom went bust. In this edition of Crisis Chronicles, we describe America’s first great economic crisis.

Matthew Plosser



In a recent post, I discussed the significant impact that “fracking” and other unconventional energy development has had on bank deposits. Using this deposit windfall, I estimated how banks allocate these funds, finding that over the recent business cycle they reduced the portion used for loans. In this post, I will discuss what may have influenced the decision to lend these funds or to hold liquid assets like cash or securities.

Matthew Plosser



Banks play a crucial role in the economy by channeling funds from savers to borrowers. The ability of banks to accomplish this intermediation has become an important element in understanding the causes and consequences of business cycles. In a recent staff report, I investigate how a positive deposit windfall translates into investments by banks. This post, the first of two, shows how the development of new energy resources has led to deposit inflows to banks and how that can be used to estimate banks’ investment decisions over the recent business cycle. The second post will look at factors that might explain the business cycle patterns observed below.