-Liberty Street Economics
Liberty Street Economics
Return to Liberty Street Economics Home Page

7 posts from November 2020

November 24, 2020

How Bank Reserves Are Distributed Matters. How You Measure Their Distribution Matters Too.



Changes in the distribution of banks’ reserve balances are important since they may impact conditions in the federal funds market and alter trading dynamics in money markets more generally. In this post, we propose using the Lorenz curve and Gini coefficient as a new approach to measuring reserve concentration. Since 2013, concentration, as captured by the Lorenz curve and the Gini coefficient, has co-moved with aggregate reserves, decreasing as aggregate reserves declined (such as in 2015-18) and increasing as aggregate reserves increased (such as at the onset of the COVID-19 pandemic).

Continue reading "How Bank Reserves Are Distributed Matters. How You Measure Their Distribution Matters Too." »

Posted by Blog Author at 7:00 AM in Bank Capital, Banks, Fed Funds, Federal Reserve, Financial Markets, Inequality, Panic | Permalink | Comments (0)

November 23, 2020

Monetizing Privacy with Central Bank Digital Currencies



Monetizing Privacy with Central Bank Digital Currencies

In prior research, we documented evidence suggesting that digital payment adoptions have accelerated as a result of the COVID-19 pandemic. While digitalization of payment activity improves data utilization by firms, it can also infringe upon consumers’ right to privacy. Drawing from a recent paper, this blog post explains how payment data acquired by firms impacts market structure and consumer welfare. Then, we discuss the implications of introducing a central bank digital currency (CBDC) that offers consumers a low-cost, privacy-preserving electronic means of payment—essentially, digital cash.

Continue reading "Monetizing Privacy with Central Bank Digital Currencies" »

Posted by Blog Author at 7:00 AM in Central Bank, Currency, Financial Intermediation, Household Finance | Permalink | Comments (0)

November 18, 2020

The Impact of Natural Disasters on the Corporate Loan Market



LSE_2020_natural-disasters_santos_460_art

Natural disasters are usually associated with an increase in the demand for credit by both households and companies in the affected regions. However, if capacity constraints preclude banks from meeting the local increase in demand, the banks may reduce lending elsewhere, thus propagating the shock to unaffected areas. In this post, we analyze the corporate loan market and find that banks, particularly those with lower capital, reduce credit provisioning to distant regions unaffected by natural disasters. We also find that shadow banks only partially offset the reduction in bank credit, so borrowers in regions unaffected by natural disasters experience a decline in credit supply.

Continue reading "The Impact of Natural Disasters on the Corporate Loan Market" »

Posted by Blog Author at 7:00 AM in Banks, Financial Intermediation | Permalink | Comments (0)

November 17, 2020

Following Borrowers through Forbearance



Following Borrowers through Forbearance

Today, the New York Fed’s Center for Microeconomic Data reported that total household debt balances increased slightly in the third quarter of 2020, according to the latest Quarterly Report on Household Debt and Credit. This increase marked a reversal from the modest decline in the second quarter of 2020, a downturn driven by a sharp contraction in credit card balances. In the third quarter, credit card balances declined again, even as consumer spending recovered somewhat; meanwhile, mortgage originations came in at a robust $1.049 trillion, the highest level since 2003. Many of the efforts to stabilize the economy in response to the COVID-19 crisis have focused on consumer balance sheets, both through direct cash transfers and through forbearances on federally backed debts. Here, we examine the uptake of forbearances on mortgage and auto loans and its impact on their delinquency status and the borrower’s credit score. This analysis, as well as the Quarterly Report on Household Debt and Credit, is based on anonymized Equifax credit report data.

Continue reading "Following Borrowers through Forbearance" »

Posted by Blog Author at 11:00 AM in Household Finance, Mortgages | Permalink | Comments (0)

November 16, 2020

How Has COVID-19 Affected Banking System Vulnerability?



The COVID-19 pandemic has led to significant changes in banks’ balance sheets. To understand how these changes have affected the stability of the U.S. banking system, we provide an update of four analytical models that aim to capture different aspects of banking system vulnerability.

Continue reading "How Has COVID-19 Affected Banking System Vulnerability?" »

Posted by Blog Author at 7:00 AM in Financial Institutions, Pandemic | Permalink | Comments (0)

November 10, 2020

The Fed Funds Market during the 2007-09 Financial Crisis



The U.S. federal funds market played a central role in the financial system during the 2007-09 crisis, because it was the market which provided banks with immediate liquidity, even late in the day. Interpreting changes in fed funds rates is notoriously difficult, however, as many of the economic drivers behind the rates are simultaneously changing. In this post, I highlight results from a working paper which untangles the impact of these economic drivers and measures their respective effects on the marketplace using data over a sample period leading up to and during the financial crisis. The analysis shows that the spread between fed funds sold and bought widened because of increases in counterparty risk. Further, there was a large increase in the supply of cash into this market, suggesting that banks viewed fed funds as a relatively safe place to invest cash in a crisis environment.

Continue reading "The Fed Funds Market during the 2007-09 Financial Crisis" »

Posted by Blog Author at 7:00 AM in Crisis, Fed Funds, Financial Intermediation | Permalink | Comments (0)

November 09, 2020

Has the Pandemic Reduced U.S. Remittances Going to Latin America?



LSE_2020_reduced-remittances_klitgaard_460_art

Workers' remittances—funds that migrants send to their country of birth—are an important source of income for a number of economies in Latin America, with the bulk of these funds coming from the United States. Have these flows dried up, given the COVID-19 recession and resulting unprecedented job losses? We find that remittances initially faltered but rebounded in the summer months, performing better than during the last U.S. recession despite more severe job losses. Large government income support payments probably explain some of this resilience. Whether remittances continue to hold up is likely to depend on how quickly the U.S. job market recovers, particularly in hard-hit service industries.

Continue reading "Has the Pandemic Reduced U.S. Remittances Going to Latin America?" »

Posted by Blog Author at 7:00 AM in International Economics, Pandemic | Permalink | Comments (0)

About the Blog
Liberty 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.


Most Viewed

Last 12 Months
Useful Links
Comment Guidelines
We 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 Policy
The 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