February 2020 – Liberty Street Economics

February 26, 2020

Did Subprime Borrowers Drive the Housing Boom?

James Conklin, W. Scott Frame, Kristopher Gerardi, and Haoyang Liu

The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.

Posted at 7:00 am in Banks, Central Bank, Credit, Crisis, Economic History, Financial Institutions, Financial Markets, Household, Household Finance, Housing, Mortgages, Recession | Permalink | Comments (8)

February 24, 2020

Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK

Sushant Acharya and Keshav Dogra

To shed light on the macroeconomic consequences of heterogeneity, Acharya and Dogra develop a stylized HANK model that contains key features present in more complicated HANK models.

Posted at 7:00 am in Central Bank, Credit, Federal Reserve, Financial Institutions, Fiscal Policy, Inequality, Macroecon, Monetary Policy, Recession, Systemic Risk | Permalink | Comments (0)

February 19, 2020

At the New York Fed: Fourteenth Annual Joint Conference with NYU-Stern on Financial Intermediation

Kristian Blickle, Anna Kovner, and Shivram Viswanathan

Blickle, Kovner, and Viswanathan share a synopsis of a recent conference featuring new research in financial intermediation and expert perspectives on corporate credit markets.

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

February 13, 2020

Firm-Level Shocks and GDP Growth: The Case of Boeing’s 737 MAX Production Pause

Julian di Giovanni

Events specific to large firms can have significant effects on the macroeconomy. The recent pause in Boeing’s 737 MAX production is a striking example of such an event or “shock.” This post provides a back-of-the envelope calculation of how the “737 MAX shock” could impact U.S. GDP growth in the first quarter of 2020.

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

February 12, 2020

Reading the Tea Leaves of the U.S. Business Cycle—Part Two

Richard Crump, Domenico Giannone, and David Lucca

New work by Richard Crump, Domenico Giannone, and David Lucca finds labor market data to be the most reliable information for dating the U.S. business cycle.

Posted at 7:00 am in Labor Market, Macroecon, Recession, Unemployment | Permalink | Comments (1)

February 11, 2020

Charging into Adulthood: Credit Cards and Young Consumers

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

The New York Fed’s Center for Microeconomic Data today released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2019. Total household debt balances grew by $193 billion in the fourth quarter, marking a $601 billion increase in household debt balances in 2019, the largest annual gain since 2007. The main driver was a $433 billion annual upswing in mortgage balances, also the largest since 2007.

Posted at 11:04 am in Credit, Household Finance | Permalink | Comments (0)

February 10, 2020

Reading the Tea Leaves of the U.S. Business Cycle—Part One

Richard Crump, Domenico Giannone, and David Lucca

Richard Crump, Domenico Giannone, and David Lucca discuss different conceptual approaches to dating the business cycle and study their past performance for the U.S. economy.

Posted at 7:00 am in Labor Market, Macroecon, Recession | Permalink | Comments (0)

February 5, 2020

The Affordable Care Act and For-Profit Colleges

Rajashri Chakrabarti and Maxim Pinkovskiy

Getting health insurance in America is intimately connected to choosing whether and where to work. Therefore, it should not be surprising that the U.S. health insurance market may influence, and be influenced by, the market for higher education—which itself is closely tied to the labor market. In this post, and the staff report it is based on, we investigate the effects of the largest overhaul of health insurance in the U.S. in recent decades—the Patient Protection and Affordable Care Act of 2010 (ACA) — on college enrollment choices.

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

February 3, 2020

Have the Risk Profiles of Large U.S. Bank Holding Companies Changed?

Ricardo Correa, Linda Goldberg, and Kevin Lai

After the global financial crisis, regulatory changes were implemented to support financial stability, with some changes directly addressing capital and liquidity in bank holding companies (BHCs) and others targeting BHC size and complexity. Although the overall size of the largest U.S. BHCs has not decreased since the crisis, the organizational complexity of these same organizations has declined, with less notable changes being observed in their range of businesses and geographic scope (Goldberg and Meehl forthcoming). In this post, we explore how different types of BHC risks—risks that can influence the probability that a BHC is stressed, as well as the chance of systemic implications—have changed over time. The results are mixed: Levels of most BHC risks currently tend to be higher than in the years immediately preceding the crisis, but are markedly lower than the levels seen during and immediately following the crisis.

Posted at 7:00 am in Banks, Dodd-Frank, Financial Institutions, Financial Intermediation, Regulation, Systemic Risk | Permalink | Comments (0)