Liberty Street Economics

Look for our next post on August 5.

July 10, 2023

How Exposed Are U.S. Banks’ Loan Portfolios to Climate Transition Risks?

Hyeyoon Jung, João A.C. Santos, and Lee Seltzer

Much of the work on climate risk has focused on the physical effects of climate change, with less attention devoted to “transition risks” related to negative economic effects of enacting climate-related policies and phasing out high-emitting technologies. Further, most of the work in this area has measured transition risks using backward-looking metrics, such as carbon emissions, which does not allow us to compare how different policy options will affect the economy. In a recent Staff Report, we capitalize on a new measure to study the extent to which banks’ loan portfolios are exposed to specific climate transition policies. The results show that while banks’ exposures are meaningful, they are manageable.

Posted at 7:00 am in Banks, Climate Change, Financial Institutions | Permalink

July 6, 2023

Where Is Inflation Persistence Coming From?

Martin Almuzara, Babur Kocaoglu, and Argia Sbordone

Elevated inflation continues to be a top-of-mind preoccupation for households, businesses, and policymakers. Why has the post-pandemic inflation proved so persistent? In a Liberty Street Economics post early in 2022, we introduced a measure designed to dissect the buildup of the inflationary pressures that emerged in mid-2021 and to understand where the sources of its persistence are. This measure, that we labeled Multivariate Core Trend (MCT) inflation analyzes whether inflation is short-lived or persistent, and whether it is concentrated in particular economic sectors or broad-based.

Posted at 11:00 am in Inflation, Macroeconomics | Permalink

The EGIs: Analyzing the Economy Through an Equitable Growth Lens

Rajashri Chakrabarti, Dan Garcia, and Maxim Pinkovskiy

Dectorative image of collage of polaroids of diverse group of people portraits.

Inflation remains elevated, labor markets are close to the strongest they have been, real consumption is up year-over year, but all of these observations are with respect to averages. Behind these macroeconomic trends can be widely varying experiences across different demographic and socioeconomic groups that make up our society. To provide researchers, practitioners, and the public with timely, regularly updated and comprehensive answers to these questions, we launched the Equitable Growth Indicators (EGIs)—a new tool to help foster the evolving discussion about economic inequality and equitable growth. To illustrate the utility of the EGIs, we provide examples of some striking differences in trends captured in the May release of the EGIs on inflation, real earnings, and real spending. More heterogeneity analysis and data are available at nyfed.org/egi.

Posted at 10:00 am in Equitable Growth, Household Finance, Inflation | Permalink

June 27, 2023

Not Just “Stimulus” Checks: The Marginal Propensity to Repay Debt

Gizem Koşar, Davide Melcangi, Laura Pilossoph, and David Wiczer

Decorative image: Man holding a piece of paper working on a calculator.

Households frequently use stimulus checks to pay down existing debt. In this post, we discuss the empirical evidence on this marginal propensity to repay debt (MPRD), and we present new findings using the Survey of Consumer Expectations. We find that households with low net wealth-to-income ratios were more prone to use transfers from the CARES Act of March 2020 to pay down debt. We then show that standard models of consumption-saving behavior can be made consistent with these empirical findings if borrowers’ interest rates rise with debt. Our model suggests that fiscal policy may face a trade-off between increasing aggregate consumption today and assisting those with the largest debt balances.

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

June 23, 2023

2nd Annual International Roles of the U.S. Dollar Conference

Alain Chaboud, Ricardo Correa, Patrick Douglass, Linda S. Goldberg, Juan M. Londono, and Fabiola Ravazzolo

photo: three presenters of the US Dollar conference: left to right: Leonardo Elias Financial Research Economist Federal Reserve Bank of New York; Hyeyoon Jung Financial Research Economist Federal Reserve Bank of New York; Darrell Duffie Adams Distinguished Professor of Management and Professor of Finance at the Graduate School of Business, and professor by courtesy, Department of Economics Stanford University

The U.S. dollar plays a central role in the global economy. In addition to being the most widely used currency in foreign exchange transactions, it represents the largest share in official reserves, international debt securities and loans, cross-border payments, and trade invoicing. The ubiquity of the U.S. dollar in global transactions reflects several key factors, including the depth and liquidity of U.S. capital markets, the size of the U.S. economy, the relatively low cost of converting dollars into other currencies, and an enduring confidence in the U.S. legal system and its institutions.

Posted at 9:00 am in Financial Institutions, International Economics, Nonbank (NBFI) | Permalink

The Credibility of Government Policies: Conference in Honor of Guillermo Calvo

Andy Neumeyer, Paolo Pesenti, and Martín Uribe

Guillermo Calvo is a leading member of a group of economists who revolutionized macroeconomics by modeling how incentives and the anticipation of future policies affect aggregate outcomes. In celebration of his work, a conference was held in his honor at the Federal Reserve Bank of New York and at Columbia University on February 22-24, 2023. The conference program can be found on the event website. A longer version of this post with additional detail on the proceedings can be found here.

Posted at 7:00 am in Expectations, Inflation, Macroeconomics | Permalink

June 22, 2023

Elevated Rent Expectations Continue to Pressure Low‑Income Households

Andrew Haughwout, Ben Hyman, Ben Lahey, Devon Lall, and Jason Somerville

illustration of person sitting on their suitcases outside of a house with a lock on the front door with the question: who feels most vulnerable.

The Federal Reserve Bank of New York’s 2023 SCE Housing Survey, released in April, reported some novel data about expectations for home prices, interest rates, and mortgage refinancing. While the data showed a sharp drop in home price expectations, some of the most notable findings concern renters. In this post, we take a deeper dive into how renters’ expectations and financial situations have evolved over the past year. We find that both owners and renters expect rents to rise rapidly over the next year, albeit at a slower pace than last year. Furthermore, we also show that eviction expectations rose sharply over the past twelve months, and that this increase was most pronounced for those in the lowest quartile of the income distribution.

Posted at 2:00 pm in Equitable Growth, Housing, Inflation | Permalink

June 20, 2023

Is Work‑from‑Home Working?

Natalia Emanuel and Emma Harrington

Decorative image: man working on laptop at home with dog sitting next to him

Though some offices have re-opened as the pandemic has receded, many workers have continued to work from home. Recent survey data suggest that workers would like more remote-work days than firms want to supply—a pattern that was evident even before the pandemic. Why have firms been so reluctant to offer remote work? And what will the recent seismic shift in remote work mean for the economy?

Posted at 7:00 am in Labor Market | Permalink

June 16, 2023

The New York Fed DSGE Model Forecast— June 2023

Marco Del Negro, Aidan Gleich, Donggyu Lee, Ramya Nallamotu, and Sikata Sengupta

Editor's note: We have updated the "date of forecast" row in the forecast comparison table to display the correct year (2023, not 2024). (September 25, 2023, 5:04 p.m.)

decorative illustration: chart and stock prices background.

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 March 2023.

Posted at 9:00 am in DSGE, Macroeconomics | Permalink

2023 State‑of‑the‑Field Conference on Cyber Risk to Financial Stability

Nitansha Bansal, Jason Healey, Anna Kovner, Michael Lee, Patricia Mosser, and Virpratap Vikram Singh

Decorative image: hand holding mobile device with cyber risk icon image overlay.

The Federal Reserve Bank of New York and Columbia University’s School of International and Public Affairs (SIPA) co-organized the fourth annual State-of-the-Field Conferences on Cyber Risk to Financial Stability, on April 14, 2023. The conference builds on joint activity by the New York Fed and SIPA since 2017. Each year, the conference convenes panels to confront the same three questions: What are we learning about cyber risk to financial stability? What are we doing to improve resilience and stability? And what’s next? This blog post reviews some of these conversations from the 2023 conference.

Posted at 7:00 am in Financial Institutions, Systemic Risk | Permalink

Markets & Policy Implementation

Liberty Street Economics

How Exposed Are U.S. Banks’ Loan Portfolios to Climate Transition Risks?

Where Is Inflation Persistence Coming From?

The EGIs: Analyzing the Economy Through an Equitable Growth Lens

Not Just “Stimulus” Checks: The Marginal Propensity to Repay Debt

2nd Annual International Roles of the U.S. Dollar Conference

The Credibility of Government Policies: Conference in Honor of Guillermo Calvo

Elevated Rent Expectations Continue to Pressure Low‑Income Households

Is Work‑from‑Home Working?

The New York Fed DSGE Model Forecast— June 2023

2023 State‑of‑the‑Field Conference on Cyber Risk to Financial Stability

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