Just Released: Interactive R-star Charts

Anna Snider

With the arrival of Bank President John Williams from the San Francisco Fed, we’re now running—and sharing the output of—models he helped develop to obtain estimates of the natural rate of interest, or r-star, for the United States and other advanced economies. In the models’ definition, r-star is the real interest rate that allows an economy to expand in line with its underlying potential while keeping inflation stable.

Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?

Thomas Klitgaard and Linda Wang



The federal tax cut and the increase in federal spending at the beginning of 2018 substantially increased the government deficit, requiring a jump in the amount of Treasury securities needed to fund the gap. One question is whether the government will have to rely on foreign investors to buy these securities. Data for the first half of 2018 are available and, so far, the country has not had to increase the pace of borrowing from abroad. The current account balance, which measures how much the United States borrows from the rest of the world, has been essentially unchanged. Instead, the tax cut has boosted private saving, allowing the United States to finance the higher federal government deficit without increasing the amount borrowed from foreign investors.

The New York Fed DSGE Model Forecast—October 2018

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

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 July 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.

Will Demographic Headwinds Hobble China’s Economy?

Hunter Clark and Thomas Klitgaard



China’s population is only growing at a 0.5 percent annual rate, its working-age cohort (ages 15 to 64) is shrinking, and the share of the population that is 65 and over is rising rapidly. Together, these trends will act as a significant restraint on the country’s economic growth. Nonetheless, there are reasons to conclude that growth will remain relatively strong going forward, most notably because the ongoing shift from rural to urban jobs will continue to boost labor productivity for some time to come.

Opening the Toolbox: The Nowcasting Code on GitHub

Patrick Adams, Brandyn Bok, Daniele Caratelli, Domenico Giannone, Eric Qian, Argia Sbordone, Camilla Schneier, and Andrea Tambalotti



In April 2016, we unveiled—and began publishing weekly—the New York Fed Staff Nowcast, an estimate of GDP growth using an automated platform for tracking economic conditions in real time. Today we go a step further by publishing the MATLAB code for the nowcasting model, available here on GitHub, a public repository hosting service. We hope that sharing our code will make it easier for people interested in monitoring the macroeconomy to understand the details underlying the nowcast and to replicate our results.

The Transatlantic Economy Ten Years after the Crisis: Macro-Financial Scenarios and Policy Responses

Moreno Bertoldi, Paolo Pesenti, Hélène Rey, and Petr Wagner



“The Transatlantic Economy Ten Years after the Crisis: Macro-Financial Scenarios and Policy Response,” was the focus of a conference, jointly organized by the New York Fed, the European Commission, and the Centre for Economic Policy Research in April 2018. These three institutions had previously collaborated on a series of events related to transatlantic economic relations, including a workshop in April 2014 and a conference in April 2016. Ten years after the global financial crisis, this conference came at a crucial time in the history of the relationship between the United States and the European Union, and provided an opportunity to revisit and assess recent policy responses. A number of questions were addressed by the panelists: Is the world economy back on a sustainable growth path or have we entered a secular stagnation era with persistently low interest rates and inflation? How large are the spillovers of monetary and fiscal policies? Have we done enough to maintain financial stability and deal with cross-border resolution issues, which have been one of the most vexing topics in the regulatory space?

The New York Fed DSGE Model Forecast–July 2018

Sushant Acharya, Michael Cai, Marco Del Negro, Abhi Gupta, and Pearl Li

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 March 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.

Good News, Leverage, and Sudden Stops

Ozge Akinci and Ryan Chahrour




One of the major debates in open economy macroeconomics is the extent to which capital inflows are beneficial for growth. In principle, these flows allow countries to increase their consumption and investment spending beyond their income by enabling them to tap into foreign saving. Periods of such borrowing, however, are associated with large trade deficits, external debt accumulation, and, in some cases, overheating when these economies operate beyond their potential output level for an extended period of time. The relevant question in this context is whether the rate at which a country is taking on external debt has useful predictive information about financial crises.

Just Released: The New York Fed Staff Forecast—April 2018

Jonathan McCarthy, Richard Peach, and Robert Rich

Today, the Federal Reserve Bank of New York is hosting the spring meeting of its Economic Advisory Panel (EAP). As has become the custom at this meeting, the New York Fed’s Research staff is presenting its forecast for U.S. growth, inflation, and the unemployment rate. Following the presentation, members of the EAP, which consists of leading economists in academia and the private sector, are asked to critique the staff forecast. Such feedback helps the staff evaluate the assumptions and reasoning underlying its forecast as well as the forecast’s key risks. The feedback is also an important part of the forecasting process because it informs the staff’s discussions with New York Fed President William Dudley about economic conditions. In that same spirit, we are sharing a short summary of the staff forecast in this post; for more detail, see the New York Fed Staff Outlook Presentation from the EAP meeting on our website.

A DSGE Perspective on Safety, Liquidity, and Low Interest Rates

Marco Del Negro, Domenico Giannone, Marc Giannoni, Abhi Gupta, Pearl Li, and Andrea Tambalotti

Third of three posts

The preceding two posts in this series documented that interest rates on safe and liquid assets, such as U.S. Treasury securities, have declined significantly in the past twenty years. Of course, short-term interest rates in the United States are under the control of the Federal Reserve, at least in nominal terms. So it is legitimate to ask, To what extent is this decline driven by the Federal Reserve’s interest rate policy? This post addresses this question by coupling the results presented in the previous post with those obtained from an estimated dynamic stochastic general equilibrium (DSGE) model.