Liberty Street Economics

February 14, 2024

How and Why Do Consumers Use “Buy Now, Pay Later”?

Felix Aidala, Daniel Mangrum, and Wilbert van der Klaauw

Decorative illustration: two shopping bags (small and large). Text on Image Credit access and What's the role of BNPL?

In a previous post, we highlighted that financially fragile households are disproportionately likely to use “buy now, pay later” (BNPL) payment plans. In this post, we shed further light on BNPL’s place in its users’ household finances, with a particular focus on how use varies by a household’s level of financial fragility. Our results reveal substantially different use patterns, as more-fragile households tend to use the service to make frequent, relatively small, purchases that they might have trouble affording otherwise. In contrast, financially stable households tend to not use BNPL as frequently and are more likely to emphasize that BNPL allows them to avoid paying interest on credit-finance purchases. We explore below what drives these differences and consider the implications for future BNPL use.

Posted at 10:00 am in Credit, Household Finance | Permalink | Comments (1)

February 12, 2024

Measuring Treasury Market Depth

Michael Fleming, Isabel Krogh, and Claire Nelson

Decorative Image: image of 3 United States Savings Bonds.

A commonly used measure of market liquidity is market depth, which refers to the quantity of securities market participants are willing to buy or sell at particular prices. The market depth of U.S. Treasury securities, in particular, is assessed in many analyses of market functioning, including this Liberty Street Economics post on liquidity in 2023, this article on market functioning in March 2020, and this paper on liquidity after the Global Financial Crisis. In this post, we review the many measurement decisions that go into depth calculations and show that inferences about the evolution of Treasury market depth, and hence liquidity, are largely invariant with respect to these decisions.

Posted at 7:00 am in Financial Markets | Permalink | Comments (1)

February 7, 2024

Wealth Inequality by Age in the Post‑Pandemic Era

Rajashri Chakrabarti, Natalia Emanuel, and Ben Lahey

Editor’s note: Since this post was first published, percentages cited in the first paragraph have been corrected. (February 7, 1pm)

Decorative Illustration: 3 flowers one with person and bag with money symbol. Who's gaining more?

Following our post on racial and ethnic wealth gaps, here we turn to the distribution of wealth across age groups, focusing on how the picture has changed since the beginning of the pandemic. As of 2019, individuals under 40 years old held just 4.9 percent of total U.S. wealth despite comprising 37 percent of the adult population. Conversely, individuals over age 54 made up a similar share of the population and held 71.6 percent of total wealth. Since 2019, we find a slight narrowing of these wealth disparities across age groups, likely driven by expanded ownership of financial assets among younger Americans.

Posted at 10:01 am in Household Finance, Inequality | Permalink

Racial and Ethnic Wealth Inequality in the Post‑Pandemic Era

By Rajashri Chakrabarti, Natalia Emanuel, and Ben Lahey

Editor’s note: Since this post was first published, the authors updated their analysis to focus on the household level of wealth rather than the aggregate level. Please refer to the new blog post and findings here Racial and Ethnic Inequalities in Household Wealth Persist. (June 28, @ 7:19am)

Decorative illustration: 3 people on a pedestal. Whose net worth increased?

Wealth is unevenly distributed across racial and ethnic groups in the United States. In this first post in a two-part series on wealth inequality, we use the Distributional Financial Accounts (DFA) to document these disparities between Black, Hispanic, and white households from the first quarter of 2019 to the third quarter of 2023 for wealth and a variety of asset and liability categories. We find that these disparities have been exacerbated since the pandemic, likely due to rapid growth in the financial assets more often held by white individuals.

Posted at 10:00 am in Demographics, Financial Markets, Inequality, Pandemic | Permalink | Comments (2)

February 6, 2024

Auto Loan Delinquency Revs Up as Car Prices Stress Budgets

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

Decorative image: Woman receiving the keys to a car from a car dealership.

The New York Fed’s Center for Microeconomic Data released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2023 this morning. Household debt balances grew by $212 billion over the last quarter. Although there was growth across most loan types, it was moderate compared to the fourth-quarter changes seen in the past few years. Mortgage balances grew by $112 billion and home equity line of credit (HELOC) balances saw an $11 billion bump as borrowers tapped home equity in lieu of refinancing first mortgages. Credit card balances, which typically see substantial increases in the fourth quarter coinciding with holiday spending, grew by $50 billion, and are now 14.5 percent higher than in the fourth quarter of 2022. Auto loan balances saw a $12 billion increase from the previous quarter, continuing the steady growth that has been in place since 2011. In this post, we revisit our analysis on credit cards and examine which groups are struggling with their auto loan payments. The Quarterly Report and this analysis are based on the New York Fed Consumer Credit Panel (CCP), a panel which is drawn from Equifax credit reports.

Posted at 11:00 am in Credit, Household Finance, Inflation, Pandemic | Permalink

January 18, 2024

The Power of Proximity: How Working beside Colleagues Affects Training and Productivity

Natalia Emanuel, Emma Harrington, and Amanda Pallais

Firms remain divided about the value of the office for “office” workers. Some firms think that their employees are more productive when working from home. Others believe that the office is a key place for investing in workers’ skills. In this post, which is based on a recent working paper, we examine whether both sides could be right: Could working in the office facilitate investments in workers’ skills for tomorrow that diminish productivity today?

Posted at 7:00 am in Demographics, Employment, Human Capital, Labor Market | Permalink

January 11, 2024

Towards Increasing Complexity: The Evolution of the FX Market

Alain Chaboud, Lisa Chung, Linda S. Goldberg, and Anna Nordstrom

Editor’s note: Since this post was first published, the first paragraph under the “Looking Forward” subhead has been updated to clarify the expected increase in the speed of FX transaction settlements. (Jan. 25, 2:30 p.m.)

Decorative photo of a currency exchange board with prices listed.

The foreign exchange market has evolved extensively over time, undergoing important shifts in the types of market participants and the mix of instruments traded, within a trading ecosystem that has become increasingly complex. In this post, we discuss fundamental changes in this market over the past twenty-five years and highlight some of the implications for its future evolution. Our analysis suggests that maintaining a healthy price discovery process and fostering a level playing field among participants are areas to watch for challenges. The consequences of the evolution of the FX market—well beyond those anticipated twenty-five years ago—remain active areas of research and policy consideration.

Posted at 7:00 am in Exchange Rates, International Economics | Permalink

January 10, 2024

An Overlooked Factor in Banks’ Lending to Minorities

Matteo Crosignani and Hanh Le

Illustration: Economic Inequality - Credit Access: What affects lending disparities? gold background with ill of a bank building and four people of different races. arrows showing a circular motion between them.

In the second quarter of 2022, the homeownership rate for white households was 75 percent, compared to 45 percent for Black households and 48 percent for Hispanic households. One reason for these differences, virtually unchanged in the last few decades, is uneven access to credit. Studies have documented that minorities are more likely to be denied credit, pay higher rates, be charged higher fees, and face longer turnaround times compared to similar non-minority borrowers. In this post, which is based on a related Staff Report, we show that banks vary substantially in their lending to minorities, and we document an overlooked factor in this difference—the inequality aversion of banks’ stakeholders.

Posted at 7:00 am in Banks, Housing, Inequality | Permalink

January 8, 2024

Measuring Price Inflation and Growth in Economic Well‑Being with Income‑Dependent Preferences

Danial Lashkari

Photo: Young minority family unloading groceries from car

How can we accurately measure changes in living standards over time in the presence of price inflation? In this post, I discuss a novel and simple methodology that uses the cross-sectional relationship between income and household-level inflation to construct accurate measures of changes in living standards that account for the dependence of consumption preferences on income. Applying this method to data from the U.S. suggests potentially substantial mismeasurements in our available proxies of average growth in consumer welfare in the U.S.

Posted at 7:00 am in Inequality, Inflation, Macroeconomics | Permalink | Comments (1)

December 21, 2023

Where Is R‑Star and the End of the Refi Boom: The Top 5 Posts of 2023

Anna Snider

The topics covered on Liberty Street Economics in 2023 hit many themes, reflecting the range of research interests of the more than sixty staff economists at the New York Fed and their coauthors. We published 122 posts this year, exploring important subjects such as equitable growth and the economic impacts of extreme weather, alongside our deep and long-standing coverage of topics like inflation, banking system vulnerability, international economics, and monetary policy effects. As we close out the year, we’re taking a look back at the top five posts. See you again in 2024.

Posted at 7:00 am in Banks, Household Finance, Treasury | Permalink

Markets & Policy Implementation

Liberty Street Economics

How and Why Do Consumers Use “Buy Now, Pay Later”?

Measuring Treasury Market Depth

Wealth Inequality by Age in the Post‑Pandemic Era

Racial and Ethnic Wealth Inequality in the Post‑Pandemic Era

Auto Loan Delinquency Revs Up as Car Prices Stress Budgets

The Power of Proximity: How Working beside Colleagues Affects Training and Productivity

Towards Increasing Complexity: The Evolution of the FX Market

An Overlooked Factor in Banks’ Lending to Minorities

Measuring Price Inflation and Growth in Economic Well‑Being with Income‑Dependent Preferences

Where Is R‑Star and the End of the Refi Boom: The Top 5 Posts of 2023

Most Read this Year