Liberty Street Economics

May 31, 2024

Can Discount Window Stigma Be Cured?

Olivier Armantier

close up photo of the federal reserve building

One of the core responsibilities of central banks is to act as “lender of last resort” to the financial system. In the U.S., the Federal Reserve has been operating as a lender of last resort through its “discount window” (DW) for more than a century. Historically, however, the DW has been plagued by stigma—banks’ reluctance to use the DW, even for benign reasons, out of concerns that it could be interpreted as a sign of financial weakness. In this post, we report on new research showing that once a DW facility is stigmatized, removing that stigma is difficult.

Posted at 9:00 am in Central Bank, Monetary Policy | Permalink

Thinking of Pursuing a PhD in Economics? Info on Graduate School and Beyond

Kasey Chatterji-Len and Anna Kovner

Photo of three young students writing a formula on a green blackboard with white chalk.

Becoming a PhD economist can provide a fulfilling and financially secure career path. However, getting started in the field can be daunting if you don’t know much about the preparation you’ll need and the available job opportunities. If you’re wondering what it means to be an economics researcher or how to become one, please read on. We’ll review how to prepare for a career in economics research, what an economics PhD program entails, and what types of opportunities it might bring. Economic education is a core component of the Federal Reserve Bank of New York’s mission to serve the community. To empower would-be economists, this post provides information for students who seek a career in economics research. We hope this information will be helpful to students interested in economics, regardless of their background and economic situation.  This information is most applicable to students applying to programs in the United States.

Posted at 7:00 am in Education | Permalink

May 29, 2024

Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves

Patrick Douglass, Linda S. Goldberg, and Oliver Z. Hannaoui

Editor's note: Since this post was first published the note on the final chart has been corrected to reflect that as depicted gold shares are calculated based on national valuation. (June 3, 2024, 9:00 am)

Close-up of a 20-dollar banknote (figuring president Jackson) and a gold bullion

Global central banks and finance ministries held nearly $12 trillion of foreign exchange reserves as of the end of 2023, with nearly $7 trillion composed of U.S. dollar assets. Nevertheless, a narrative has emerged that an observed decline in the share of dollar assets in official reserve portfolios represents the leading edge of the dollar’s loss of status in the international monetary system. Some market participants have similarly linked the apparent increase in official demand for gold in recent years to a desire to diversify away from the U.S. dollar. Drawing on recent research and analytics, this post questions these narratives, arguing that these observed aggregate trends largely reflect the behavior of a small number of countries and do not represent a widespread effort by central banks to diversify away from dollars.

Posted at 7:00 am in Central Bank, International Economics | Permalink | Comments (1)

May 28, 2024

Do Exchange‑Traded Products Improve Bitcoin Trading?

Ken Armstrong, Asani Sarkar, and Leslie Conner Warren

Decorative photo: Close-up financial trading chart on digital LCD display of BTC bitcoin.

Spot bitcoin exchange-traded products (ETPs) began trading in the U.S. on January 11, 2024. For investors, these ETPs purport improved liquidity and price efficiency, and more convenient access to bitcoin trading compared to other means of trading bitcoin in spot markets. Proponents also cite bitcoin holdings as a portfolio diversification opportunity due to historically low correlation with traditional financial securities. Others argue that bitcoin remains a speculative asset and that ETPs increase its interconnections with the traditional financial system. In this post, we examine the initial performance, trading costs, and price efficiency of spot bitcoin ETPs in the U.S.

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

May 22, 2024

Veterans in the Labor Market: 2024 Update

Rajashri Chakrabarti, Dan Garcia, and Maxim Pinkovskiy

Photo: people in army fatigues lined up single file looking at their backs with the hands clasped behind them.

Veterans constitute a significant segment of the male labor force, and understanding labor market disparities between veterans and non‑veterans is an important component of studying disparities in the economy as a whole. In a previous Liberty Street Economics post, we have shown that even relative to a group of comparable non-veterans, veterans have lower employment and labor force participation rates. One year later, we see that veterans continue to experience lower labor market attachment and the employment gap has widened, though the earnings gap has closed.

Posted at 9:30 am in Labor Market | Permalink | Comments (2)

May 21, 2024

The Changing Landscape of Corporate Credit

Nina Boyarchenko and Leonardo Elias

Photo: upward looking at tall glass skyscrapers that are corporate offices against a blue sky.

Firms’ access to credit is a crucial determinant of their investment, employment, and overall growth decisions. While we usually think of their ability to borrow as determined by aggregate credit conditions, in reality firms have a number of markets where they can borrow, and conditions can vary across those markets. In this post, we investigate how the composition of debt instruments on U.S. firms’ balance sheets has evolved over the last twenty years.

Posted at 7:00 am in Banks, Corporate Finance, Credit, Financial Intermediation | Permalink

May 20, 2024

Supply Chain Disruptions Have Eased, But Remain a Concern

Jaison R. Abel and Richard Deitz

Photo: several yellow trucks backed into a loading dock

Supply chain disruptions became a major headache for businesses in the aftermath of the pandemic. Indeed, in October 2021, nearly all firms in our regional business surveys reported at least some difficulty obtaining the supplies they needed. These supply chain disruptions were a key contributor to the surge in inflation that occurred as the economy recovered from the pandemic recession. In this post, we present new measures of supply availability from our Business Leaders Survey and Empire State Manufacturing Survey that closely track the New York Fed’s Global Supply Chain Pressure Index (GSCPI). We will begin publishing these data on a monthly basis starting in June. These indexes indicate that supply availability had generally been improving since early 2023, but over the past couple of months, improvement has stalled. This trend is concerning since our May Supplemental Survey indicates that between a third and a half of businesses in the region are experiencing difficulties obtaining supplies, and many are reducing operations and raising prices to compensate, though to a lesser extent than a few years ago.

Posted at 8:30 am in New Jersey, New York, Regional Analysis, Supply Chain | Permalink

May 16, 2024

Is the Recent Inflationary Spike a Global Phenomenon?

Martín Almuzara, Babur Kocaoglu, and Argia Sbordone

In the aftermath of the COVID-19 pandemic, inflation rose almost simultaneously in most economies around the world. After peaking in mid-2022, inflation then went into decline—a fall that was just as universal as the initial rise. In this post, we explore the interrelation of inflation dynamics across OECD countries by constructing a measure of the persistence of global inflation. We then study the extent to which the persistence of global inflation reflects broad-based swings, as opposed to idiosyncratic country-level movements. Our main finding is that the spike and subsequent moderation in global inflation in the post-pandemic period were driven by persistent movements. When we look at measures of inflation that include food and energy prices, most of the persistence appears to be broad-based, suggesting that international oil and commodity prices played an important role in global inflation dynamics. Excluding food and energy prices in the analysis still shows a broad-based persistence, although with a substantial increase in the role of country-specific factors.

Posted at 7:00 am in Inflation | Permalink

May 15, 2024

Do Unexpected Inflationary Shocks Raise Workers’ Wages?

Jacob Weber

Photo: two construction workers working on a new building wearing hard hats.

The past year’s steady decline in nominal wage growth now appears in danger of stalling. Given ongoing uncertainty in Ukraine and the Middle East, this seems an opportune moment to revisit the conventional wisdom about the relationship between inflation and wages: if an unexpected increase in energy costs drives up the cost of living, will workers demand higher wages, reversing the recent moderation in wage growth? In new work with Justin Bloesch and Seung Joo Lee examining those concerns, our analysis shows that the pass-through of such inflationary shocks to wages is weak.

Posted at 7:00 am in Inflation | Permalink

May 14, 2024

Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers

Andrew F. Haughwout, Donghoon Lee, Daniel Mangrum, Joelle Scally, Wilbert van der Klaauw, and Crystal Wang

Editor’s note: Since this post was first published, the aggregate credit card utilization rate cited in the second paragraph has been corrected. (May 14, 12:05pm). The percentage of Gen Z credit card users who are “maxed-out” has been corrected in the text and now matches the table. (May 15, 2024, 4:00 pm)

Photo: man holding a wallet in one and a credit card in another with a bag next to him.

This morning, the New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for the first quarter of 2024. Household debt balances grew by $184 billion over the previous quarter, slightly less than the moderate growth seen in the fourth quarter of 2023. Housing debt balances grew by $206 billion. Auto loans saw a $9 billion increase, continuing their steady growth since the second quarter of 2020, while balances on other non-housing debts fell. Credit card balances fell by $14 billion, which is typical for the first quarter. However, an increasing number of borrowers are behind on credit card payments. In this post, we explore the relationship between credit card delinquency and changes in credit card “utilization rates.”

Posted at 11:00 am in Credit, Household Finance | Permalink | Comments (3)

Markets & Policy Implementation

Liberty Street Economics

Can Discount Window Stigma Be Cured?

Thinking of Pursuing a PhD in Economics? Info on Graduate School and Beyond

Taking Stock: Dollar Assets, Gold, and Official Foreign Exchange Reserves

Do Exchange‑Traded Products Improve Bitcoin Trading?

Veterans in the Labor Market: 2024 Update

The Changing Landscape of Corporate Credit

Supply Chain Disruptions Have Eased, But Remain a Concern

Is the Recent Inflationary Spike a Global Phenomenon?

Do Unexpected Inflationary Shocks Raise Workers’ Wages?

Delinquency Is Increasingly in the Cards for Maxed‑Out Borrowers

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