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



In our first post in this series we showed that mortgage provisions under the CARES ACT and its subsequent extensions resulted in a rapid take-up of mortgage forbearances, under which borrowers had the option to pause or reduce debt service payments without inducing a delinquency notation on their credit reports. Here we examine the forbearance take-up rate of a group of mortgage borrowers we expect to have been particularly hard hit by the pandemic recession: small business owners. Relatively little is known about how small business owners have fared over the past year in terms of their personal finances. Were they able to continue making mortgage payments on their homes? Did they draw on home equity to help fund their business operations?

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



As we discussed in our previous post, millions of mortgage borrowers have entered forbearance since the beginning of the pandemic, and more than 2 million remain in a program as of March 2021. In this post, we use our Consumer Credit Panel (CCP) data to examine borrower behavior while in forbearance. The credit bureau data are ideal for this purpose because they allow us to follow borrowers over time, and to connect developments on the mortgage with those on other credit products. We find that forbearance results in reduced mortgage delinquencies and is associated with increased paydown of other debts, suggesting that these programs have significantly improved the financial positions of the borrowers who received them.

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



Federal government actions in response to the pandemic have taken many forms. One set of policies is intended to reduce the risk that the pandemic will result in a housing market crash and a wave of foreclosures like the one that accompanied the Great Financial Crisis. An important and novel tool employed as part of these policies is mortgage forbearance, which provides borrowers the option to pause or reduce debt service payments during periods of hardship, without marking the loan delinquent on the borrower’s credit report. Widespread take-up of forbearance over the past year has significantly changed the housing finance system in the United States, in different ways for different borrowers. This post is the first of four focusing attention on the effects of mortgage forbearance and the outlook for the mortgage market. Here we use data from the New York Fed’s Consumer Credit Panel (CCP) to examine the effects of these changes on households during the pandemic.

Ozge Akinci and Albert Queralto



The question of how U.S. monetary policy affects foreign economies has received renewed interest in recent years. The bulk of the empirical evidence points to sizable effects, especially on emerging market economies (EMEs). A key theme in the literature is that these spillovers operate largely through financial channels—that is, the effects of a U.S. policy tightening manifest themselves abroad via declines in international risky asset prices, tighter financial conditions, and capital outflows. This so-called Global Financial Cycle has been shown to affect EMEs more forcefully than advanced economies. It is because higher U.S. policy rates have a disproportionately larger impact on rates in EMEs. In our recent research, we develop a model with cross-border financial linkages that provides theoretical foundations for these empirical findings. In this Liberty Street Economics post, we use the model to illustrate the spillovers from a tightening of U.S. monetary policy on credit spreads and on the uncovered interest rate parity (UIP) premium in EMEs with dollar-denominated debt.

David Dam, Davide Melcangi, Laura Pilossoph, and Will Schirmer



Spending on goods and services that were constrained during the pandemic is expected to grow at a fast pace as the economy reopens. In this post, we look at detailed spending data to track which consumption categories were the most constrained by the pandemic due to social distancing. We find that, in 2019, high-income households typically spent relatively more on these pandemic-constrained goods and services. Our findings suggest that these consumers may have strongly reduced consumption during the pandemic and will likely play a crucial role in unleashing pent-up demand when pandemic restrictions ease.

Ruchi Avtar, Rajashri Chakrabarti, Maxim Pinkovskiy, and Giorgio Topa



This post is the first in a two-part series that seeks to understand whether consumer spending patterns during the COVID-19 pandemic evolved differentially across counties by race and income. As the pandemic hit and social distancing restrictions were put into place in March 2020, consumer spending plummeted. Subsequently, as social distancing restrictions began to be relaxed later in spring 2020, consumer spending started to rebound. We find that higher-income counties had a considerably steeper decline and a shallower recovery than low-income counties did. The differences by race were also sizeable as the pandemic struck but became considerably more muted after summer of 2020. The decline and the recovery until the end of summer were sharper for majority-minority (MM) than majority nonminority (MNM) counties, while both sets of counties showed similar growth in spending after that. The second post in this series highlights the goods and services that were most adversely affected (or “constrained”) by the pandemic. Then, differentiating households by income, that post explores which households were more exposed to these pandemic-constrained expenditure categories.

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



Total household debt rose by $85 billion in the first quarter of 2021, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Since the start of the pandemic, household debt balances have increased in every quarter but one—the second quarter of 2020, when lockdowns were in full effect. The Quarterly Report and this analysis are based on the New York Fed's Consumer Credit Panel, which is drawn from anonymized Equifax credit data.

Jaison R. Abel and Richard Deitz



Women’s labor force participation grew precipitously in the latter half of the 20th century, but by around the year 2000, that progress had stalled. In fact, the labor force participation rate for prime-age women (those aged 25 to 54) fell four percentage points between 2000 and 2015, breaking a decades-long trend. However, as the labor market gained traction in the aftermath of the Great Recession, more women were drawn into the labor force. In less than five years, between 2015 and early 2020, women’s labor force participation had recovered nearly all of the ground lost over the prior fifteen years. Then the pandemic hit, erasing these gains. In recent months, as the economy has begun to heal, women’s labor force participation has increased again, but there is much ground to be made up, especially for Black and Hispanic women. A strong labor market with rising wages, as was the case in the years leading up to the pandemic, will be instrumental in bringing more women back into the labor force.

David Dam, Sebastian Heise, Davide Melcangi, and Will Schirmer



The services sector was hit hard during the COVID-19 pandemic. Small businesses were particularly affected, and many of them were forced to close. We examine the state of these firms using micro data from Homebase (HB), a scheduling and time tracking tool that is used by around 100,000 businesses, mostly small firms, in the leisure and hospitality and retail industries. The data reveal that 35 percent of businesses that were active prior to the pandemic are still closed and that most have been inactive for twenty weeks or longer. We estimate that each additional week of being closed reduces the probability that a business reopens by 2 percentage points. Moreover, an additional week of business closure lowers the share of workers that are rehired at reopening. Our estimates imply that only about 4 percent of the workers that are still laid off from the currently closed businesses will eventually be rehired by these businesses.

Pablo Azar



During the COVID-19 pandemic, many industries adapted to new social distancing guidelines by adopting new technologies, providing protective equipment for their employees, and digitizing their methods of production. These changes in industries’ supply chains, together with monetary and fiscal stimulus, contributed to dampening the economic impact of COVID-19 over time. In this post, I discuss a new framework that analyzes how changes in supply chains can drive economic growth in the long run and mitigate recessions in the short run.