-
About the
New York Fed -
Economic
Research -
Financial Institution Supervision
- Financial Services
& Infrastructure- Outreach
& EducationThe New York Fed engages with individuals, households and businesses in the Second District and maintains an active dialogue in the region. The Bank gathers and shares regional economic intelligence to inform our community and policy makers, and promotes sound financial and economic decisions through community development and education programs.
Liberty Street Economics
8 posts from September 2015September 30, 2015
Natural Experiment Sheds Light on the Market Effects of Herding
Pension funds are expected to behave in a patient, countercyclical manner, making the most of low valuations over the business cycle to achieve high returns. Such behavior provides liquidity and stability to the financial system. However, this belief has come under question. A large theoretical literature has emerged which looks at how short-term considerations affecting these institutional investors might arise from relative performance concerns or from the influence of other incentives introduced by market and regulatory monitoring. Such considerations might incentivize fund managers to mimic others and herd toward common assets. Given the sizable wealth under management by these investors, such herding behavior can potentially have large effects on asset prices both in the short and long run.
Continue reading "Natural Experiment Sheds Light on the Market Effects of Herding" »
Posted by Blog Author at 7:00 AM in Financial Institutions, Financial Markets | Permalink | Comments (0)September 28, 2015
Same Name, New Businesses: Evolution in the Bank Holding Company
Correction: We revised the left panel of the chart “BHC Subsidiary Composition” on March 16, 2016, to update the number of “Nonfinancial” firms. This figure was understated in the original version of the chart. We regret the error.
When we think of banks, we typically have in mind our local bank branch that stores deposits and issues mortgages or business loans. Prima facie there is nothing wrong with this image. After all, there are still almost 6,000 unique commercial banks in the United States that specialize in deposit-taking and loan-making; when we include thrifts and credit unions, this number more than doubles. What we typically forget, however, is that most commercial banks are subsidiaries of larger bank holding companies (BHCs), and in fact nearly all commercial bank assets fall under such BHCs. This post presents a first in-depth analysis of the evolving organizational structure of U.S. bank holding companies over the last twenty-five years. We present a unique new database that details BHC structure at a level previously unavailable in any systematic way.
Continue reading "Same Name, New Businesses: Evolution in the Bank Holding Company" »
September 23, 2015
How Much Do Inflation Expectations Matter for Inflation Dynamics?
Inflation dynamics are often described by some form of the Phillips curve. Named after A. W. Phillips, the British economist whose study of U.K. wage and unemployment data laid the groundwork, the Phillips curve denotes an inverse relationship between inflation and some measure of economic slack. A much-discussed issue in the literature is how forward-looking this relationship is. In this post, we address this question using a flexible version of the New Keynesian Phillips curve (NKPC) to illustrate the key role that expectations play in inflation dynamics.
Continue reading "How Much Do Inflation Expectations Matter for Inflation Dynamics?" »
Posted by Blog Author at 7:00 AM in DSGE, Expectations, Inflation, Macroecon, Monetary Policy, Phillips Curve, Wages | Permalink | Comments (0)September 22, 2015
Do Better Bank Services Have a Hidden Cost?
You walk into a bank branch, check in hand. You find yourself in a well-lit space with modern furnishings, and you help yourself to a cup of freshly brewed coffee, courtesy of the bank. Neatly dressed assistants in uniform stand in a row, ready to attend to customers at a moment’s notice, and in fact, one of them approaches you to help you deposit your check. Having finished your business, you leave feeling reassured that such a customer-oriented organization is diligently tending to your hard-earned money. But what could possibly be missing?
Continue reading "Do Better Bank Services Have a Hidden Cost?" »
September 21, 2015
Are BHCs Mimicking the Fed’s Stress Test Results?
In March, the Federal Reserve and thirty-one large bank holding companies (BHCs) disclosed their annual Dodd-Frank Act stress test (DFAST) results. This is the third year in which both the BHCs and the Fed have published their projections. In a previous post, we looked at whether the Fed’s and the BHCs’ stress test results are converging in the aggregate and found mixed results. In this post, we look at stress test projections made by individual BHCs. If the Fed’s projections are very different from a BHC’s in one year, do the BHC projections change in the following year to close this gap? Or are year-to-year changes in BHC stress test projections driven more by changes in underlying risk factors? Evidence of BHCs mimicking the Fed would be problematic if it meant that the BHCs are not really independently modelling their own risks. Convergence poses a potential risk to the financial system, since a financial system with monoculture in risk measurement models could be less stable than one in which firms use diverse models that collectively might be more likely to identify emerging risks.
Continue reading "Are BHCs Mimicking the Fed’s Stress Test Results?" »
Posted by Blog Author at 7:00 AM in Bank Capital, Financial Institutions, Forecasting | Permalink | Comments (0)September 04, 2015
From the Vault: Understanding Puerto Rico’s Economic Challenges
Recent news examining the toll that a decade of stagnation, out-migration, and heavy debt has taken on Puerto Rico draws on work summarized in two Liberty Street Economics posts. For example, the New York Times cited our analysis of the U.S. Commonwealth’s ongoing population decline. In an April post, economists Jaison Abel and Richard Deitz put numbers on the exodus, reporting that over the last ten years, Puerto Rico’s population has dwindled to 3.6 million, a decline of more than 5 percent, which they attribute in part to falling birthrates but mostly to migration to the U.S. mainland.
Continue reading "From the Vault: Understanding Puerto Rico’s Economic Challenges" »
September 02, 2015
Searching for Higher Wages
Since the peak of the recession, the unemployment rate has fallen by almost 5 percentage points, and observers continue to focus on whether and when this decline will lead to robust wage growth. Typically, in the wake of such a decline, real wages grow since there is more competition for workers among potential employers. While this relationship has historically been quite informative, real wage growth more recently has not been commensurate with observed declines in the unemployment rate.
Posted by Blog Author at 7:00 AM in Employment, Labor Economics, Unemployment, Wages | Permalink | Comments (3)September 01, 2015
A Distributed Version of Repugnance as a Constraint on Markets
The 2012 Nobel Prize in economics was awarded to Alvin E. Roth and Lloyd S. Shapley for their work on matching problems. Two-sided matching problems, like assigning jobs to workers or dorm rooms to students, can be complicated enough. But sometimes the matching problem can be even more difficult. It may be that an item supplied by Alice is useful to Bob, but Bob has nothing of value to give to Alice. If, however, the item supplied by Bob is valuable to Charlie, then there is the potential for a matching chain. Charlie gives something to Alice, Alice gives something to Bob, and Bob gives something to Charlie. Such chains can by themselves be very complicated, and work must be done to identify chains that provide the most benefit. The first Nobel laureate mentioned above has done considerable work designing matching mechanisms used in kidney exchange. But why is all of this necessary? Why isn’t there simply a market with prices?
Continue reading "A Distributed Version of Repugnance as a Constraint on Markets" »
About the BlogLiberty 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.
Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.
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.
View by Topicbank capital balance of payments banks central bank corporate finance credit crisis crisis chronicles cryptocurrencies currency current account dealers demographics dodd-frank dsge economic history education employment euro area exchange rates expectations exports fed funds federal reserve financial institutions financial intermediation financial markets fire sale fiscal policy fomc forecasting foreclosure great recession hey, economist! high frequency trading historical echoes household household finance housing human capital inequality inflation international economics labor economics labor market lender of last resort liquidity macroecon monetary policy mortgages new jersey new york new york city pandemic panic phillips curve puerto rico recession regional analysis regulation repo sandy stocks student loans systemic risk tariffs treasury unemployment wagesMost Viewed1. 2. 3 4. 5.
Last 12 MonthsUseful LinksComment GuidelinesWe 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 PolicyThe 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 - Financial Services
RSS Feed