Liberty Street Economics

November 17, 2021

Uneven Distribution of Household Debt by Gender, Race, and Education

Ruchi Avtar, Rajashri Chakrabarti, and Kasey Chatterji-Len

Household debt has risen markedly since 2013 and amounts to more than $15 trillion dollars. While the aggregate volume of household debt has been well-documented, literature on the gender, racial and education distribution of debt is lacking, largely because of an absence of adequate data that combine debt, demographic, and education information. In a three-part series beginning with this post, we seek to bridge this gap. In this first post, we focus on differences in debt holding behavior across race and gender. Specifically, we explore gender and racial disparities in different types of household debt and delinquencies—for auto, mortgage, credit card, and student loans—while distinguishing between students pursuing associate’s (AA) and bachelor’s (BA) degrees. In the second post in this series, we investigate gender and racial disparities in delinquencies across these various kinds of consumer debt. We close with a third post where we try to understand some of the mechanisms behind differences in debt and delinquencies across gender and race.

Posted at 6:00 am in Equitable Growth, Household Finance, Inequality, Student Loans | Permalink

November 15, 2021

Banking System Vulnerability through the COVID‑19 Pandemic

Matteo Crosignani, Thomas Eisenbach, and Fulvia Fringuellotti

More than a year into the COVID-19 pandemic, the U.S. banking system has remained stable and seems to have weathered the crisis well, in part because of effects of the policy actions undertaken during the early stages of the pandemic. In this post, we provide an update of four analytical models that aim to capture different aspects of banking system vulnerability and discuss their perspective on the COVID pandemic. The four models, introduced in a Liberty Street Economics post in November 2018 and updated annually since then, monitor vulnerabilities of U.S. banking firms and the way in which these vulnerabilities interact to amplify negative shocks.

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

November 10, 2021

How Does Market Power Affect Fire‑Sale Externalities?

Thomas Eisenbach and Gregory Phelan

An important role of capital and liquidity regulations for financial institutions is to counteract inefficiencies associated with “fire-sale externalities,” such as the tendency of institutions to lever up and hold illiquid assets to the extent that their collective actions increase financial vulnerabilities. However, theoretical models that study such externalities commonly assume perfect competition among financial institutions, in spite of high (and increasing) financial sector concentration. In this post, which is based on our forthcoming article, we consider instead how the effects of fire-sale externalities change when financial institutions have market power.

Posted at 7:00 am in Bank Capital, Banks, Financial Institutions, Liquidity, Regulation | Permalink

November 9, 2021

Credit Card Trends Begin to Normalize after Pandemic Paydown

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

Today, the New York Fed’s Center for Microeconomic Data released its Quarterly Report on Household Debt and Credit for the third quarter of 2021. Overall debt balances increased, bolstered primarily by a sizeable increase in mortgage balances, and for the second consecutive quarter, an increase in credit card balances. The changes in credit card balances in the second and third quarters of 2021 are remarkable since they appear to be a return to the normal seasonal patterns in balances. In a Liberty Street Economics post earlier this year we wrote about some demographic variation in these balance changes and the likely role of stimulus checks and forbearance programs in helping borrowers pay down expensive revolving debt balances. Here, we’ll take a fresh look at credit card balances and at the dynamics behind new and closing credit card accounts and limit changes, to examine how credit access and usage continue to evolve. The Quarterly Report and this analysis are based on our Consumer Credit Panel, which is itself based on Equifax credit data.

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

November 8, 2021

High Import Prices along the Global Supply Chain Feed Through to U.S. Domestic Prices

Mary Amiti, Sebastian Heise, and Aidan Wang

The prices of U.S. imported goods, excluding fuel, have increased by 6 percent since the onset of the COVID-19 pandemic in February 2020. Around half of this increase is due to the substantial rise in the prices of imported industrial supplies, up nearly 30 percent. In this post, we consider the implications of the increase in import prices on U.S. industry inflation rates. In particular, we highlight how rising prices of imported intermediate inputs, like industrial supplies, can have amplified effects through the U.S. economy by increasing the production cost of goods that rely heavily on these inputs.

Posted at 7:00 am in Inflation, International Economics, Macroeconomics, Supply Chain | Permalink

November 5, 2021

Hey, Economist! Tell Us about the New Applied Macroeconomics and Econometrics Center

An Interview with Marco Del Negro

Applied Macroeconomics & Econometrics Center (AMEC)

Marco Del Negro is the director of the Federal Reserve Bank of New York’s new research center, AMEC, which stands for the Applied Macroeconomics and Econometrics Center. Ahead of hosting its first symposium, “Heterogeneity in Macroeconomics: Implications for Policy,” Liberty Street Economics caught up with Del Negro to learn more about his vision for AMEC.

Posted at 9:00 am in Hey, Economist!, Macroeconomics | Permalink | Comments (1)

October 22, 2021

How Much Have Consumers Spent on Imports during the Pandemic?

Matthew Higgins and Thomas Klitgaard

The return of U.S. real GDP to its pre-pandemic level in the second quarter of this year was driven by consumer spending on goods. Such spending was well above its pre-pandemic path, while spending on services was well below. Despite the surge in goods spending, domestic manufacturing has increased only modestly, leaving most of the increase in demand being filled by imports. While higher imports have been a drag on growth, the size of this drag has been moderated by the value created by the domestic transportation, wholesale, and retail sectors in selling these goods. Going forward, a rebalancing of consumer spending toward services could give a lift to growth, by shifting demand toward purchases with little import content.

Posted at 7:00 am in International Economics, Macroeconomics, Pandemic | Permalink

October 21, 2021

Severe Supply Disruptions Are Impeding Business Activity in the Region

Jaison R. Abel, Jason Bram, Richard Deitz, and Jessica Lu

As the economy continues to recover from the pandemic recession, many businesses are struggling to keep up with surging demand amid widespread supply shortages and delays. While a rare phenomenon before the pandemic, supply chain disruptions have become increasingly common, with transportation of goods becoming especially tricky due to myriad issues such as clogged ports and difficulty finding truck drivers. Indeed, such supply disruptions are expected to continue into next year. Our October regional business surveys asked firms to what extent, if any, they are being affected by supply problems and what measures they have taken in response. Difficulty obtaining supplies was nearly universal among survey respondents, affecting about 80 percent of service firms and 95 percent of manufacturers. A large share of businesses in the region have responded to the disruptions by increasing their selling prices and scaling back their operations.

Posted at 7:00 am in Macroeconomics, New Jersey, New York, Pandemic, Regional Analysis, Supply Chain | Permalink

October 20, 2021

The International Experience of Central Bank Asset Purchases and Inflation

Gianluca Benigno and Paolo Pesenti

Recent inflationary pressures in the global economy have rekindled the debate on the link between money growth and price stability. Specifically, does rapid central bank money creation resulting from large-scale purchases of government securities fuel inflationary spending by households and firms? We argue that there are many valid reasons to be skeptical about this textbook narrative. In this post, we look at the international experience with regard to asset purchases, money growth, and inflation dynamics in the pre-COVID era in an attempt to draw lessons from the recent past. Most notably, we find that the view that large-scale purchases of sovereign debt cause unmanageable inflationary pressures is not supported by the experiences of foreign advanced economies. As a matter of fact, despite the extent and duration of the quantitative easing programs in those economies, central banks faced challenges in achieving their inflation objectives.

Posted at 7:00 am in Inflation | Permalink

October 18, 2021

Were Banks Exposed to Sell‑offs by Open‑End Funds during the Covid Crisis?

Nicola Cetorelli

Should open-end mutual funds experience redemption pressures, they may be forced to sell assets, thus contributing to asset price dislocations that in turn could be felt by other entities holding similar assets. This fire-sale externality is a key rationale behind proposed and implemented regulatory actions. In this post, I quantify the spillover risks from fire sales, and present some preliminary results on the potential exposure of U.S. banking institutions to asset fire sales from open-end funds.

Posted at 7:00 am in Banks, Financial Intermediation, Liquidity, Systemic Risk | Permalink

Markets & Policy Implementation

Liberty Street Economics

Uneven Distribution of Household Debt by Gender, Race, and Education

Banking System Vulnerability through the COVID‑19 Pandemic

How Does Market Power Affect Fire‑Sale Externalities?

Credit Card Trends Begin to Normalize after Pandemic Paydown

High Import Prices along the Global Supply Chain Feed Through to U.S. Domestic Prices

Hey, Economist! Tell Us about the New Applied Macroeconomics and Econometrics Center

How Much Have Consumers Spent on Imports during the Pandemic?

Severe Supply Disruptions Are Impeding Business Activity in the Region

The International Experience of Central Bank Asset Purchases and Inflation

Were Banks Exposed to Sell‑offs by Open‑End Funds during the Covid Crisis?

Economic Inequality

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