Liberty Street Economics

Look for our next post on September 2.

August 13, 2025

How Firms Spread Good Management

Nicholas Bloom, Jonathan Hartley, Raffaella Sadun, Rachel Schuh, and John Van Reenen

Photo: Factory Digitalization: Two Industrial Engineers Use Tablet Computer, Big Data Statistics Visualization, Optimization of High-Tech Electronics Facility. Industry 4.0 Machinery Manufacturing Products

What is good management, and how is it transmitted across firms and plants? In a recent paper, we use survey and administrative data, coupled with a structural model of management, to explore these questions. We show that well-managed manufacturing firms—that is, firms that adopt more structured management practices described below—not only open and acquire more plants, but also close and sell more plants. Through this process, the firms transmit their management practices to new plants. These facts, taken together, imply that acquisitions can increase aggregate productivity by allowing well-managed firms to take over poorly managed plants and improve their management practices.

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

August 11, 2025

Who Is Still on First? An Update of Characteristics of First‑Time Homebuyers

Donghoon Lee and Joseph Tracy

Photo: young couple with boy child bringing moving boxes into a newly purchased home that is blue clapboard and white trimmed windows. Boy is bringing his mother, who is standing in the doorway, a plant that looks like lavender.

Following the COVID-19 health crisis, home prices and mortgage rates rose sharply. This created concerns that first-time homebuyers (FTBs) would be disadvantaged and would lose ground. Earlier this year, we documented that the share of purchase mortgages by FTBs, as well as their share of home purchases, have actually increased slightly over the past couple of years. It appears that FTBs are holding their own in this challenging housing market. This raises the question of whether the characteristics of FTBs have changed. In a 2019 post, we described the characteristics of these buyers over the period from 2000 to 2016. In this post, we provide an update through 2024.

Posted at 7:00 am in Household Finance, Housing | Permalink | Comments (2)

August 7, 2025

Flood Risk and Flood Insurance

Kristian S. Blickle, Evan Perry, and João A.C. Santos

An aerial view shows floodwater surrounding homes on April 07, 2025 in East Prairie, Missouri. Thunderstorms, heavy rains, high winds and tornadoes have plagued the region for the past several days, causing widespread damage before moving east. (Photo by Scott Olson/Getty Images)

Recent natural disasters have renewed concerns about insurance markets for natural disaster relief. In January 2025, wildfires wreaked havoc in residential areas outside of Los Angeles. Direct damage estimates for the Los Angeles wildfires range from $76 billion to $131 billion, with only up to $45 billion of insured losses (Li and Yu, 2025). In this post, we examine the state of another disaster insurance market: the flood insurance market. We review features of flood insurance mandates, flood insurance take-up, and connect this to work in a related Staff Report that explores how mortgage lenders manage their exposure to flood risk. Mortgages are a transmission channel for monetary policy and also an important financial product for both banks and nonbank lenders that actively participate in the mortgage market.

Posted at 7:00 am in Banks, Climate Change, Housing | Permalink | Comments (0)

August 5, 2025

A Check‑In on the Mortgage Market

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

Photo: Panorama of sunlit small suburban houses on a tree-lined street in the summer

Debt balances continued to march upward in the second quarter of 2025, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Mortgage balances in particular saw an increase of $131 billion. Following a steep rise in home prices since 2019, several housing markets have seen dips in prices and concerns were sparked about the state of the mortgage market. Here, we disaggregate mortgage balances and delinquency rates by type and region to better understand the landscape of the current mortgage market, where any ongoing risks may lie, regionally and by product.

Posted at 11:00 am in Banks, Household Finance, Housing | Permalink | Comments (2)

July 16, 2025

How Shadow Banking Reshapes the Optimal Mix of Regulation

Kinda Hachem

Photo: Imposing bank facade with columns bathed in dramatic light in black setting, conveying shadow banking. Ai generated image.

Decisions that are privately optimal often impose externalities on other agents, giving rise to regulations aimed at implementing socially optimal outcomes. In the banking industry, regulations are particularly heavy, plausibly reflecting a view by regulators that the relevant externalities could culminate in financial crises and destabilize the broader economy. Over time, the toolkit for regulating banks and bank-like institutions has expanded, as has banks’ restructuring of activities into shadow banking to lessen the regulatory burden. This post, based on our recent Staff Report, explores the optimal mix of prudential tools for bank regulators in a wide range of environments.

Posted at 7:00 am in Nonbank (NBFI) | Permalink

July 14, 2025

Who Lends to Households and Firms?

Nina Boyarchenko and Leonardo Elias

Decorative illustration of bank building with columns in bright green on a dark green background with dots and globe around it and lights streaming out.

The financial sector in the U.S. economy is deeply interconnected. In our previous post, we showed that incorporating information about this network of financial claims leads to a substantial reassessment of which financial sectors are ultimately financing the lending to the real sector as a whole (households plus nonfinancial firms). In this post, we delve deeper into the differences between the composition of lending to households and nonfinancial firms in terms of direct lending as well as the patterns of “adjusted lending” that we compute by accounting for the network of claims financial subsectors have on each other.

Posted at 7:00 am in Banks, Credit, Household Finance, Nonbank (NBFI) | Permalink

July 10, 2025

The Rise in Deposit Flightiness and Its Implications for Financial Stability

Kristian Blickle, Jian Li, Xu Lu, and Yiming Ma

Photo: Dollar paper airplane on blue background

Deposits are often perceived as a stable funding source for banks. However, the risk of deposits rapidly leaving banks—known as deposit flightiness—has come under increased scrutiny following the failures of Silicon Valley Bank and other regional banks in March 2023. In a new paper, we show that deposit flightiness is not constant over time. In particular, flightiness reached historic highs after expansions in bank reserves associated with rounds of quantitative easing (QE). We argue that this elevated deposit flightiness may amplify the banking sector’s response to subsequent monetary policy rate hikes, highlighting a link between the Federal Reserve’s balance sheet and conventional monetary policy.

Posted at 7:00 am in Banks, Financial Institutions, Liquidity, Monetary Policy | Permalink

July 8, 2025

The Fed’s Treasury Purchase Prices During the Pandemic

Ellen Correia Golay, Maximilian Dunn, Michael J. Fleming, Peter Johansson, Isabel Krogh, Or Shachar, and Joshua Younger

Close up photo of the Federal Reserve building's name carved in the stone at the top of the pillars.

In March 2020, the Federal Reserve commenced purchases of U.S. Treasury securities to address the market disruptions caused by the pandemic. This post assesses the execution quality of those purchases by comparing the Fed’s purchase prices to contemporaneous market prices. Although past work has considered this question in the context of earlier asset purchases, the market dysfunction spurred by the pandemic means that execution quality at that time may have differed. Indeed, we find that the Fed’s execution quality was unusually good in 2020 in that the Fed bought Treasuries at prices appreciably lower than prevailing market offer prices.

Posted at 7:00 am in Financial Institutions, Financial Markets, Treasury | Permalink

July 7, 2025

The Zero Lower Bound Remains a Medium‑Term Risk

Sophia Cho, Thomas M. Mertens, and John C. Williams

Photo: Planning and strategy financial portfolio and assets manager analyzing . Financial and banking - stock photography

Interest rates have fluctuated significantly over time. After a period of high inflation in the late 1970s and early 1980s, interest rates entered a decline that lasted for nearly four decades. The federal funds rate—the primary tool for monetary policy in the United States—followed this trend, while also varying with cycles of economic recessions and expansions.

Posted at 1:00 pm in Fed Funds, Financial Markets, Monetary Policy | Permalink

July 1, 2025

New Dataset Maps Losses from Natural Disasters to the County Level

Matteo Crosignani and Martin Hiti

Photo: a four-panel picture of people cleaning up after natural disasters: fire, hurricane, tornado, and flood.

The Federal Reserve’s mission and regional structure ask that it always work to better understand local and regional economic activity. This requires gauging the economic impact of localized events, including natural disasters. Despite the economic significance of natural disasters—flowing often from their human toll—there are currently no publicly available data on the damages they cause in the United States at the county level.

Posted at 10:00 am in Systemic Risk | Permalink

Markets & Policy Implementation

Liberty Street Economics

How Firms Spread Good Management

Who Is Still on First? An Update of Characteristics of First‑Time Homebuyers

Flood Risk and Flood Insurance

A Check‑In on the Mortgage Market

How Shadow Banking Reshapes the Optimal Mix of Regulation

Who Lends to Households and Firms?

The Rise in Deposit Flightiness and Its Implications for Financial Stability

The Fed’s Treasury Purchase Prices During the Pandemic

The Zero Lower Bound Remains a Medium‑Term Risk

New Dataset Maps Losses from Natural Disasters to the County Level

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