Liberty Street Economics

Liberty Street Economics

October 11, 2022

New SCE Charts Include a Measure of Longer‑Term Inflation Expectations

Felix Aidala, Olivier Armantier, Fatima-Ezzahra Boumahdi, Gizem Kosar, Devon Lall, Jason Somerville, Giorgio Topa, and Wilbert van der Klaauw

Today, the New York Fed introduces several new data series and interactive charts depicting findings from its Survey of Consumer Expectations (SCE). The SCE is a representative, internet-based monthly survey of a rotating panel of about 1,300 household heads in the United States. Since January 2014, we have been reporting findings from our monthly survey on U.S. households’ views on inflation, household income and spending growth, their expectations about the housing and labor market, and a range of other expectations about the economy and outcomes for their own household. In addition to publishing interactive charts showing national trends as well as trends by demographic groups (such as age, income, education, numeracy, and geography), we also post the underlying microdata online (with a nine-month lag) to make it available for research purposes.  We are adding three new data series to our interactive charts today. The first two concern expectations about future inflation, and the third concerns expectations of future home price growth.

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Posted at 11:00 am in Expectations, Housing, Inflation | Permalink | Comments (1)
October 6, 2022

Computer Saturation and the Productivity Slowdown

Pablo Azar

One of the current puzzles in economics is the recent worldwide slowdown in productivity, compared to the late 1990s and early 2000s. This productivity loss is economically large: if productivity growth had stayed at the same level as in 1995-2004, American GDP would have increased by trillions of dollars. In this post, I discuss a new paper that links this productivity slowdown to saturation in electronics adoption across most industries. I show that most of the productivity growth from electronic miniaturization is concentrated between 1985 and 2005.

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Posted at 7:00 am in Macroeconomics | Permalink
October 5, 2022

Measuring the Ampleness of Reserves

Gara Afonso, Gabriele La Spada, and John C. Williams

Over the past fifteen years, reserves in the banking system have grown from tens of billions of dollars to several trillion dollars. This extraordinary rise poses a natural question: Are the rates paid in the market for reserves still sensitive to changes in the quantity of reserves when aggregate reserve holdings are so large? In today’s post, we answer this question by estimating the slope of the reserve demand curve from 2010 to 2022, when reserves ranged from $1 trillion to $4 trillion.

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Posted at 7:00 am in Banks, Central Bank, Federal Reserve, Financial Institutions, Financial Markets, Monetary Policy | Permalink
October 4, 2022

Eviction Expectations in the Post‑Pandemic Housing Market

Andrew Haughwout, Ben Hyman, Benjamin Lahey, and Jason Somerville

Housing is the single largest element of the typical household’s budget, and data from the SCE Household Spending Survey show that this is especially true for renters. As the housing market heated up in the latter stages of the pandemic, home prices and rents both began to rise sharply. For renters, some protection from these increases was afforded by national, state, and in some cases local eviction moratoria, which greatly reduced the risk of households losing access to stable housing if they couldn’t afford their rent. Yet many of these protections have expired and additional supports will do so soon. In this post, we draw on data from our SCE Housing Survey to explore how renters perceive their housing risk and find that the answers depend to a large degree on their current and past experiences of the housing market.

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Posted at 7:00 am in Equitable Growth, Expectations, Housing | Permalink
September 28, 2022

Short‑Dated Term Premia and the Level of Inflation

Richard Crump, Charles Smith, and Peter Van Tassel

Since the advent of derivatives trading on short-term interest rates in the 1980s, financial commentators have often interpreted market prices as directly reflecting the expected path of future interest rates. However, market prices generally embed risk premia (or “term premia” in reference to measures of risk premia over different horizons) reflecting the compensation required to bear the risk of the asset. When term premia are large in magnitude, derivatives prices may differ substantially from investor expectations of future rates. In this post, we assess whether term premia have increased with the recent rise in inflation, given the historically positive relationship between the two series, and what this means for the interpretation of derivatives prices.  

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Posted at 7:00 am in Financial Markets, Inflation, Monetary Policy | Permalink
September 27, 2022

Revisiting Federal Student Loan Forgiveness: An Update Based on the White House Plan

Jacob Goss, Daniel Mangrum, and Joelle Scally

On August 24, 2022, the White House released a plan to cancel federal student loans for most borrowers. In April,  we wrote about the costs and who most benefits from a few hypothetical loan forgiveness proposals using our Consumer Credit Panel, based on Equifax credit report data.  In this post, we update our framework to consider the White House plan now that parameters are known, with estimates for the total amount of forgiven loans and the distribution of who holds federal student loans before and after the proposed debt jubilee.

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Posted at 7:00 am in Demographics, Education, Household Finance, Inequality, Student Loans | Permalink | Comments (2)
September 26, 2022

Is China Running Out of Policy Space to Navigate Future Economic Challenges?

Hunter Clark and Jeff Dawson

Photo: Chinese shoppers lining up to buy shopping carts full of items within a store

After making progress slowing the pace of debt accumulation prior to the pandemic, China saw its debt levels surge in 2020 as the government responded to the severe economic slowdown with credit-led stimulus. With China currently in the midst of another sharp decline in economic activity due to its property slump and zero-COVID strategy, Chinese authorities have responded again by pushing out credit to soften the downturn despite already high levels of debt on corporate, household, and  government balance sheets. In this post, we revisit China’s debt buildup and consider the growing constraints on Chinese policymakers’ tools to navigate future economic challenges.

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Posted at 7:00 am in Credit, International Economics | Permalink
September 23, 2022

The New York Fed DSGE Model Forecast—September 2022

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

Photo: decorative; numbers with line chart on top

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 June 2022.

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Posted at 9:00 am in DSGE, Forecasting, Inflation, Macroeconomics | Permalink
September 8, 2022

How Can Safe Asset Markets Be Fragile?

Thomas Eisenbach and Gregory Phelan

Photo: carton on eggs with one egg cracked

The market for U.S. Treasury securities experienced extreme stress in March 2020, when prices dropped precipitously (yields spiked) over a period of about two weeks. This was highly unusual, as Treasury prices typically increase during times of stress. Using a theoretical model, we show that markets for safe assets can be fragile due to strategic interactions among investors who hold Treasury securities for their liquidity characteristics. Worried about having to sell at potentially worse prices in the future, such investors may sell preemptively, leading to self-fulfilling “market runs” that are similar to traditional bank runs in some respects.

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Posted at 7:00 am in Federal Reserve, Financial Markets, Liquidity, Treasury | Permalink
September 6, 2022

Small Business Recovery after Natural Disasters

Martin Hiti, Claire Kramer Mills, and Asani Sarkar

The first post of this series found that small businesses owned by people of color are particularly vulnerable to natural disasters. In this post, we focus on the aftermath of disasters, and examine disparities in the ability of firms to reopen their businesses and access disaster relief. Our results indicate that Black-owned firms are more likely to remain closed for longer periods and face greater difficulties in obtaining the immediate relief needed to cope with a natural disaster.

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Posted at 7:02 am in Climate Change, Credit, Inequality | Permalink
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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.

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