February 2019 – Liberty Street Economics

February 27, 2019

Global Trends in Interest Rates

Marco Del Negro, Domenico Giannone, Marc Giannoni, Andrea Tambalotti, Brandyn Bok, and Eric Qian

Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. In this blog post, we argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The magnitude of this decline has been nearly the same in all advanced economies, since their real interest rates have converged over this period. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.

Posted at 7:00 am in Banks, Central Bank, Credit, Expectations, Federal Reserve, Financial Institutions, Financial Markets, Inflation, Liquidity, Macroecon, Monetary Policy, Treasury | Permalink | Comments (2)

February 25, 2019

What Can We Learn from the Timing of Interbank Payments?

Adam Copeland, Linsey Molloy, and Anya Tarascina

From 2008 to 2014 the Federal Reserve vastly increased the size of its balance sheet, mainly through its large-scale asset purchase programs (LSAPs). The resulting abundance of reserves affected the financial system in a number of ways, including by changing the intraday timing of interbank payments. In this post we show that (1) there appears to be a nonlinear relationship between the amount of reserves in the system and the timing of interbank payments, and (2) with the increase in reserves, smaller banks shifted their timing of payments more significantly than larger banks did. This result suggests that tracking the timing of payments sent by banks could provide an informative signal about the impact of the shrinking Federal Reserve balance sheet on the payments system.

Posted at 7:00 am in Banks, Crisis, Liquidity | Permalink | Comments (1)

February 20, 2019

Stressed Outflows and the Supply of Central Bank Reserves

Ryan Bush, Adam Kirk, Antoine Martin, Philip Weed, and Patricia Zobel

Estimates of Day 1 stressed outflows suggest that reserve balances at the Fed need to be high for banks’ to meet their liquidity needs in a stress situation.

Posted at 7:00 am in Banks, Federal Reserve, Liquidity | Permalink | Comments (1)

February 19, 2019

Just Released: Introducing the SCE Household Spending Survey

Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw

Today we are releasing new data on individuals’ experiences and expectations regarding household spending. These data have been collected every four months since December 2014 as part of our Survey of Consumer Expectations (SCE). The goal of this blog post is to introduce the SCE Household Spending Survey and highlight some of its features.

Posted at 11:00 am in Expectations, Household Finance, Liquidity, Mortgages, Student Loans, Unemployment, Wages | Permalink | Comments (0)

February 13, 2019

Could Rising Household Debt Undercut China’s Economy?

Hunter L. Clark and Jeffrey B. Dawson

Although there has been a notable deceleration in the pace of credit growth recently, the run-up in debt in China has been eye-popping, accounting for more than 60 percent of all new credit created globally over the past ten years. Rising nonfinancial sector debt was driven initially by an increase in corporate borrowing, which surged in 2009 in response to the global financial crisis. The most recent leg of China’s credit boom has been due to an important shift toward household lending. To better understand the rise in household debt in China and its implications for financial stability and China’s economic performance, it is important to examine the expansion in household credit, how the rise in debt compares to international experience, and the associated risks.

Posted at 7:13 am in Credit, Household Finance, International Economics | Permalink | Comments (2)

February 12, 2019

Just Released: Auto Loans in High Gear

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Total household debt increased modestly, by $32 billion, in the fourth quarter of 2018, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Although household debt balances have been rising since mid-2013, their sluggish growth in the fourth quarter was mainly due to a flattening in the growth of mortgage balances. Auto loans, which have been climbing at a steady clip since 2011, increased by $9 billion, boosted by historically strong levels of newly originated loans. In fact, 2018 marked the highest level in the nineteen-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports, up in nominal terms from 2017’s $569 billion. In this post, we take a closer look at the composition and performance of outstanding auto loan debt using the New York Fed’s Consumer Credit Panel (CCP), which is based on anonymized Equifax credit data and also the source for the Quarterly Report.

Posted at 11:02 am in Household Finance | Permalink | Comments (8)

February 11, 2019

The U.S. Dollar’s Global Roles: Where Do Things Stand?

Linda S. Goldberg and Robert Lerman

Previous Liberty Street Economics analysis and New York Fed research addressed the potential implications for the United States if the dollar’s global role changed, noting that the currency might not retain its dominance forever. This post checks the status of the dollar, considering whether any erosion in the dollar’s international standing has occurred. The evidence to date is that the dollar remains the world’s dominant currency by broad margins. Alternatives have not gained extensive traction, albeit this does not rule out potential future pressures.

Posted at 7:00 am in Central Bank, International Economics | Permalink | Comments (0)

February 8, 2019

The New York Fed DSGE Model Forecast—January 2019

Michael Cai, Marco Del Negro, Ethan Matlin, and Reca Sarfati

This post presents an 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 October 2018. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

Posted at 11:00 am in DSGE, Forecasting, Macroecon | Permalink | Comments (0)

February 6, 2019

Where Are Manufacturing Jobs Coming Back?

Jaison R. Abel and Richard Deitz

As we outlined in our previous post, the United States lost close to six million manufacturing jobs between 2000 and 2010 but since then has gained back almost one million. In this post, we take a closer look at the geographic dimension of this modest rebound in manufacturing jobs. While job losses during the 2000s were fairly widespread across the country, manufacturing employment gains since then have been concentrated in particular parts of the country. Indeed, these gains were especially large in “auto alley”—a narrow motor vehicle production corridor stretching from Michigan south to Alabama—while much of the Northeast continued to shed manufacturing jobs. Closer to home, many of the metropolitan areas in the New York-Northern New Jersey region have been left out of this rebound and are continuing to shed manufacturing jobs, though Albany has bucked this trend with one of the strongest performances in the country.

Posted at 7:00 am in Labor Economics, Labor Market, New Jersey, New York, New York City, Regional Analysis | Permalink | Comments (0)

February 5, 2019

Monitoring Economic Conditions during a Government Shutdown

Patrick Adams, Domenico Giannone, Eric Qian, and Argia M. Sbordone

The recent partial shutdown of the federal government has disrupted publication schedules for many U.S. Census Bureau and Bureau of Economic Analysis (BEA) data releases. Most notably, the release of GDP for the fourth quarter of 2018—originally scheduled for January 30—has been postponed indefinitely.

Posted at 11:00 am in Forecasting, Macroecon | Permalink | Comments (0)