The Sensitivity of Long-Term Interest Rates: A Tale of Two Frequencies

David Lucca, Samuel Hanson, and Jonathan Wright



The sensitivity of long-term interest rates to short-term interest rates is a central feature of the yield curve. This post, which draws on our Staff Report, shows that long- and short-term rates co-move to a surprising extent at high frequencies (over daily or monthly periods). However, since 2000, they co-move far less at lower frequencies (over six months or a year). We discuss potential explanations for this finding and its implications for the transmission of monetary policy.

Global Trends in Interest Rates

Marco Del Negro, Domenico Giannone, Marc P. Giannoni, Andrea Tambalotti, Brandyn Bok, and Eric Qian



Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. In this blog post, we argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The magnitude of this decline has been nearly the same in all advanced economies, since their real interest rates have converged over this period. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.

The New York Fed DSGE Model Forecast—January 2019

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

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 October 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.

Monitoring Economic Conditions during a Government Shutdown

Patrick Adams, Domenico Giannone, Eric Qian, and Argia Sbordone



The recent partial shutdown of the federal government has disrupted publication schedules for many U.S. Census Bureau and Bureau of Economic Analysis (BEA) data releases. Most notably, the release of GDP for the fourth quarter of 2018—originally scheduled for January 30—has been postponed indefinitely. Even without the full slate of Census Bureau and BEA releases, forecasters have continued to make predictions for 2018:Q4 GDP growth; as of February 1, the New York Fed Staff Nowcast stands at 2.6 percent, the Atlanta Fed's GDPNow stands at 2.5 percent, and the Blue Chip Financial Forecasts estimate stands at 2.6 percent. How accurate are these predictions for 2018:Q4 relative to the BEA’s first estimate? Have the missing data jeopardized the accuracy of predictions for 2019:Q1? The New York Fed Staff Nowcast provides a lens through which to answer these questions, thanks to its entirely automated design and its ability to mimic judgmental forecasters’ processing of incoming data. Using real‑time historic data, we can assess the importance of missing releases by simulating similar dataflow disruptions for past quarters.

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?