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Liberty Street Economics

Look for our next post on February 3.

November 20, 2019

Monetary Policy Transmission and the Size of the Money Market Fund Industry

Marco Cipriani, Jeff Gortmaker, and Gabriele La Spada

In a recent post, we documented the transmission of monetary policy through money market funds (MMFs). In this post, we complement that analysis by comparing the transmission of monetary policy via MMFs to the transmission via bank deposits and studying the impact of the differential pass-through on the size of the MMF industry. To this purpose, we focus on rates on certificates of deposit (CDs) offered to banks’ retail customers and compare their response to monetary policy with that of retail MMF yields.

Posted by Blog Author at 7:00 AM in Federal Reserve , Financial Institutions , Financial Intermediation , Monetary Policy | Permalink | Comments ( 4 )

November 18, 2019

Real Inventory Slowdowns

Richard K. Crump, David O. Lucca, and Casey McQuillan

Inventory investment plays a central role in business cycle fluctuations. This post examines whether inventory investment amplifies or dampens economic fluctuations following a tightening in financial conditions. We find evidence supporting an amplification mechanism. This analysis suggests that inventory accumulation will be a drag on economic activity this year but provide a boost in 2020.

Posted by Blog Author at 7:00 AM in Macroecon | Permalink | Comments ( 0 )

November 13, 2019

Just Released: Racial Disparities in Student Loan Outcomes

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

Total household debt balances increased by $92 billion in the third quarter of 2019, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. The balance increase reflected nearly across the board gains in various types of debt, with the largest gains of $31 billion in mortgage balances (0.3 percent) and $20 billion in student loan balances (1.4 percent). The Quarterly Report, and the following analysis, are both based on the New York Fed’s Consumer Credit Panel, which is itself based on anonymized Equifax credit report data. Our report also provides breakouts by age, and by state, demonstrating that patterns of borrowing and repayment are heterogeneous by those factors. But there are many other dimensions across which we see varying credit market outcomes.

Posted by Blog Author at 11:00 AM in Household Finance , Student Loans | Permalink | Comments ( 6 )

The Side Effects of Shadow Banking on Liquidity Provision

Teodora Paligorova and João A.C. Santos

Correction: When this post was first published, line labels in the panel showing Tier 1 capital ratios were reversed; the labels have been corrected. (November 13, 10:40 a.m.)

Over the past two decades, the growth of shadow banking has transformed the way the U.S. banking system funds corporations. In this post, we describe how this growth has affected both the term loan and credit line businesses, and how the changes have resulted in a reduction in the liquidity insurance provided to firms.

Posted by Blog Author at 7:00 AM in Banks , Financial Institutions , Liquidity | Permalink | Comments ( 1 )

November 08, 2019

At the New York Fed: Fifth Annual Conference on the U.S. Treasury Market

Michael J. Fleming, Peter Johansson, Frank M. Keane, and Justin Meyer

The New York Fed recently hosted the fifth annual Conference on the U.S. Treasury Market. The one-day event was co-sponsored with the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). This year’s agenda featured a series of keynote addresses and expert panels focused on a variety of topics, including issues related to the LIBOR transition, data transparency and reporting requirements, and market structure and risk.

Posted by Blog Author at 6:59 AM in Financial Markets | Permalink | Comments ( 0 )

November 06, 2019

Trade Policy Uncertainty May Affect the Organization of Firms’ Supply Chains

Sebastian Heise, Justin R. Pierce, Georg Schaur, and Peter K. Schott

Global trade policy uncertainty has increased significantly, largely because of a changing tariff regime between the United States and China. In this blog post, we argue that trade policy can have a significant effect on firms’ organization of supply chains. When the probability of a trade war rises, firms become less likely to form long-term, just-in-time relationships with foreign suppliers, which may lead to higher costs and welfare losses for consumers. Our research shows that even in the absence of actual tariff changes, an increased likelihood of a trade war can significantly distort U.S. imports.

Posted by Blog Author at 7:00 AM in International Economics | Permalink | Comments ( 0 )

November 04, 2019

Since the Financial Crisis, Aggregate Payments Have Co-moved with Aggregate Reserves. Why?

Thomas Eisenbach, Kyra Frye, and Helene Hall

Fedwire Funds, a key payment system in the United States, is used by banks to wire money to one another throughout the day. Historically, the total value of payments sent over Fedwire has been roughly proportional to economic activity. Since the financial crisis, however, we have instead observed a strong co-movement between total payments and the level of aggregate reserves. This co-movement suggests that a fraction of every dollar of reserves created recirculates on a daily basis. In this post, we investigate why total payments, a flow variable driven by real and financial activity, would co-move with total reserves, a stock variable controlled by the Federal Reserve.

Posted by Blog Author at 7:00 AM in Financial Institutions , Financial Markets | Permalink | Comments ( 0 )

October 17, 2019

Just Released: Introducing the SCE Public Policy Survey

Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw

Today, we are releasing new data on individuals’ expectations for future changes in a wide range of public policies. These data have been collected every four months since November 2015 as part of our Survey of Consumer Expectations (SCE). The goal of this post is to introduce the SCE Public Policy Survey and highlight some of its features.

Posted by Blog Author at 10:59 AM in Expectations , Household Finance , Wages | Permalink | Comments ( 0 )

October 16, 2019

Optimists and Pessimists in the Housing Market

Haoyang Liu and Christopher Palmer

Given momentum in house prices over business cycles, research on consumer beliefs since the financial crisis has honed in on the potential importance of extrapolative beliefs—myopically assuming trends in asset prices will continue. Extrapolation is frequently cited as a central reason for excessively optimistic expectations about future asset prices, featuring prominently, for example, in the irrational exuberance narrative of Shiller. Other influential work since the Great Recession has emphasized the outsized role that extrapolative optimists can have in bubble formation. In this post, we look at how much dispersion there is in the amount of house price extrapolation and how consequential extrapolative beliefs could be for house price dynamics.

Posted by Blog Author at 7:04 AM in Housing | Permalink | Comments ( 0 )

October 15, 2019

Does U.S. Health Inequality Reflect Income Inequality—or Something Else?

Maxim Pinkovskiy

Health is an integral part of well-being. The United Nations Human Development Index uses life expectancy (together with GDP per capita and literacy) as one of three key indicators of human welfare across the world. In this post, I discuss the state of life expectancy inequality in the United States and examine some of the underlying factors in its evolution over the past several decades.

Posted by Blog Author at 7:01 AM in Inequality | Permalink | Comments ( 0 )

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

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