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9 posts from February 2020

February 26, 2020

Did Subprime Borrowers Drive the Housing Boom?



Editor’s note: When this post was first published, the chart labels for “Non-Boom Counties” was incorrect; the labels have been corrected. (February 26, 12:00 pm)

Did Subprime Borrowers Drive the Housing Boom?

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.

Continue reading "Did Subprime Borrowers Drive the Housing Boom?" »

Posted by Blog Author at 7:00 AM in Banks, Central Bank, Credit, Crisis, Economic History, Financial Institutions, Financial Markets, Household, Household Finance, Housing, Mortgages, Recession | Permalink | Comments (5)

February 24, 2020

Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK



Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK

In recent years there has been a lot of interest in the effect of income inequality (heterogeneity) on the economy, from both academics and policymakers. Researchers have developed Heterogeneous Agent New Keynesian (HANK) models that incorporate heterogeneity and uninsurable idiosyncratic risk into the New Keynesian models that have become a cornerstone of monetary policy analysis. This research has argued that heterogeneity and idiosyncratic risk change many features of New Keynesian models – the transmission of conventional monetary policy, the forward guidance puzzle, fiscal multipliers, the efficacy of targeted transfers and automatic stabilizers, among others. However, the source of the difference between HANK and representative agent New Keynesian (RANK) models remains unclear. This is because HANK models are typically not analytically tractable, leaving it unclear what exactly is driving the results. To shed light on the macroeconomic consequences of heterogeneity, we develop a stylized HANK model that contains key features present in more complicated HANK models.

Continue reading "Understanding Heterogeneous Agent New Keynesian Models: Insights from a PRANK" »

Posted by Blog Author 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



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

An understanding of the developments in financial intermediation is critical to the efforts of the New York Fed to promote financial stability and economic growth. In line with this mission, the Bank recently hosted the fourteenth annual Federal Reserve Bank of New York-New York University Stern School of Business Conference on Financial Intermediation. As in years past, the conference attracted a large number of academics and policymakers from around the world who engaged in discussions of their most recent research. In this post, we discuss highlights of the conference.

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

Posted by Blog Author 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



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

Large firms play an integral role in aggregate economic activity owing to their size and production linkages. Events specific to these large firms can thus have significant effects on the macroeconomy. Quantifying these effects is tricky, however, given the complexity of the production process and the difficulty in identifying firm-level events. The recent pause in Boeing’s 737 MAX production is a striking example of such an event or “shock” to a large firm. This post applies a basic framework that is grounded in economic theory to provide a back-of-the envelope calculation of how the “737 MAX shock” could impact U.S. GDP growth in the first quarter of 2020.

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

Posted by Blog Author at 7:00 AM in Macroecon | Permalink | Comments (0)

February 12, 2020

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



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

In our previous post, we presented evidence suggesting that labor market indicators provide the most reliable information for dating the U.S. business cycle. In this post, we further develop the case. In fact, the unemployment rate has provided an almost perfect record of distinguishing the beginning of recessions in the post-war U.S. economy. We also show that using more granular labor market data, such as by region or industry, also provides valuable information about the state of the business cycle.

Continue reading "Reading the Tea Leaves of the U.S. Business Cycle—Part Two" »

Posted by Blog Author at 7:00 AM in Labor Market, Macroecon, Recession, Unemployment | Permalink | Comments (0)

February 11, 2020

Charging into Adulthood: Credit Cards and Young Consumers



Charging into Adulthood: Credit Cards and Young Consumers

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. Auto loan and credit card balances both increased by a brisk $57 billion last year, while student loan balances climbed by a more muted $51 billion, well below the $114 billion increase recorded in 2013—the fastest pace of growth for the series. The source for the Quarterly Report is the New York Fed’s Consumer Credit Panel—a panel data set that now spans twenty-one years, 1999-2019. The unique panel design allows us to identify new entrants to the credit market: as young people age into having credit reports and using credit products, they are “born” into the panel, enabling us to observe the credit behavior of young borrowers.

Continue reading "Charging into Adulthood: Credit Cards and Young Consumers" »

Posted by Blog Author at 11:04 AM in Household Finance | Permalink | Comments (0)

February 10, 2020

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



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

The study of the business cycle—fluctuations in aggregate economic activity between times of widespread expansion and contraction—is one of the foremost pursuits in macroeconomics. But even distinguishing periods of expansion and recession can be challenging. In this post, we discuss different conceptual approaches to dating the business cycle, study their past performance for the U.S. economy, and highlight the informativeness of labor market indicators.

Continue reading "Reading the Tea Leaves of the U.S. Business Cycle—Part One" »

Posted by Blog Author at 7:00 AM in Labor Market, Macroecon, Recession | Permalink | Comments (0)

February 05, 2020

The Affordable Care Act and For-Profit Colleges



The Affordable Care Act and For-Profit Colleges

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 United States in recent decades—the Patient Protection and Affordable Care Act of 2010 (ACA) -- on college enrollment choices.

Continue reading "The Affordable Care Act and For-Profit Colleges" »

Posted by Blog Author at 7:00 AM in Education | Permalink | Comments (0)

February 03, 2020

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



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

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 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.

Continue reading "Have the Risk Profiles of Large U.S. Bank Holding Companies Changed?" »

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

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