Liberty Street Economics

Liberty Street Economics

April 5, 2021

Do People View Housing as a Good Investment and Why?

Andrew Haughwout, Haoyang Liu, Dean Parker, and Xiaohan Zhang

Housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Yet there is limited understanding of how households view housing as an investment relative to financial assets, in part because of their differences beyond the usual risk and return trade-off. Housing offers households an accessible source of leverage and a commitment device for saving through an amortization schedule. For an owner-occupied residence, it also provides stability and hedges for rising housing costs. On the other hand, housing is much less liquid than financial assets and it also requires more time to manage. In this post, we use data from our just released SCE Housing Survey to answer several questions about how households view this choice: Do households view housing as a good investment choice in comparison to financial assets, such as stocks? Are there cross-sectional differences in preferences for housing as an investment? What are the factors households consider when making an investment choice between housing and financial assets?

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Posted at 11:00 am in Banks, Household Finance, Housing | Permalink | Comments (2)

“Excess Savings” Are Not Excessive

Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri, and Andrea Tambalotti

How will the U.S. economy emerge from the ongoing COVID-19 pandemic? Will it struggle to return to prior levels of employment and activity, or will it come roaring back as soon as vaccinations are widespread and Americans feel comfortable travelling and eating out? Part of the answer to these questions hinges on what will happen to the large amount of “excess savings” that U.S. households have accumulated since last March. According to most estimates, these savings are around $1.6 trillion and counting. Some economists have expressed the concern that, if a considerable fraction of these accumulated funds is spent as soon as the economy re-opens, the ensuing rush of demand might be destabilizing. This post argues that these savings are not that excessive, when considered against the backdrop of the unprecedented government interventions adopted over the past year in support of households and that they are unlikely to generate a surge in demand post-pandemic.

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Posted at 7:00 am in Banks, Crisis, Household Finance, Labor Market, Macroeconomics, Pandemic, Unemployment | Permalink | Comments (1)
March 31, 2021

The New York Fed DSGE Model Forecast—March 2021

William Chen, Marco Del Negro, Shlok Goyal, Alissa Johnson, and Andrea Tambalotti

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. The model projects solid growth over the next two years, with core inflation slowly rising toward 2 percent. Uncertainty for both output and inflation forecasts remains large.

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Posted at 9:00 am in DSGE, Forecasting, Inflation, Monetary Policy | Permalink
March 29, 2021

Who Pays What First? Debt Prioritization during the COVID Pandemic

William J. Arnesen, Jacob Conway, and Matthew Plosser

Since the depths of the Great Recession, household debt has increased from a low of $11 trillion in 2013 to more than $14 trillion in 2020 (see the New York Fed Household Debt and Credit Report). In this post, we examine how consumers’ repayment priorities have evolved over that time. Specifically, we seek to answer the following question: When consumers repay some but not all of their loans, which types do they choose to keep paying and which do they fall behind on?

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Posted at 7:00 am in Credit, Household Finance | Permalink | Comments (1)
March 25, 2021

Reasonable Seasonals? Seasonal Echoes in Economic Data after COVID‑19

David Lucca and Jonathan Wright

Seasonal adjustment is a key statistical procedure underlying the creation of many economic series. Large economic shocks, such as the 2007-09 downturn, can generate lasting seasonal echoes in subsequent data. In this Liberty Street Economics post, we discuss the prospects for these echo effects after last year’s sharp economic contraction by focusing on the payroll employment series published by the U.S. Bureau of Labor Statistics (BLS). We note that seasonal echoes may lead the official numbers to overstate actual changes in payroll employment modestly between March and July of this year after which distortions flip the other way.

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Posted at 7:00 am in Economic History, Employment, Pandemic | Permalink
March 24, 2021

Did Dealers Fail to Make Markets during the Pandemic?

Jiakai Chen, Haoyang Liu, David Rubio, Asani Sarkar, and Zhaogang Song

Sarkar and coauthors liquidity provision by dealers in several important financial markets during the COVID-19 pandemic: how much was provided, possible causes of any shortfalls, and the effects of the Federal Reserve’s actions to support the economy.

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Posted at 7:00 am in Financial Markets, Liquidity, Pandemic, Treasury | Permalink
March 22, 2021

The Persistent Compression of the Breakeven Inflation Curve

Richard K. Crump, Nikolay Gospodinov, and Desi Volker

Breakeven inflation, defined as the difference in the yield of a nominal Treasury security and a Treasury inflation protected security (TIPS) of the same maturity, is closely watched by market participants and policymakers alike. Breakeven inflation rates provide a signal about the expected path of inflation as perceived by market participants although they are also affected by risk and liquidity premia. In this post, we scrutinize the dynamics of breakeven inflation, highlighting some intriguing behavior which has persisted for a number of years and even through the pandemic. In particular, we document a substantial downward shift in the level of breakeven inflation as well as a marked flattening of the breakeven inflation curve.

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Posted at 7:00 am in Expectations, Financial Markets, Inflation | Permalink
March 19, 2021

Looking Back at 10 Years of Liberty Street Economics

Beverly Hirtle

This month the Liberty Street Economics blog is celebrating its tenth anniversary. We first welcomed readers to Liberty Street on March 21, 2011 and since then our annual page views have grown from just over 260,000 to more than 3.3 million.

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Posted at 7:00 am in Federal Reserve, Pandemic | Permalink
March 1, 2021

Will Capital Flows through Global Banks Support Economic Recovery?

Claudia M. Buch, Matthieu Bussière, and Linda S. Goldberg

Liberty Street Economics authors ask whether, based on precedent, global banks are likely to provide additional support to the economic recovery following COVID-19 in the locations they serve.

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Posted at 7:00 am in Bank Capital, Banks, Credit, Financial Institutions, Pandemic | Permalink | Comments (1)
February 24, 2021

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

Jennifer Gennaro, Jason Healey, Anna Kovner, Michael Lee, and Patricia Mosser

The Federal Reserve Bank of New York partnered with Columbia University’s School of International and Public Affairs (SIPA) for the second annual State-of-the-Field Conference on Cyber Risk to Financial Stability on December 14-15, 2020. Hosted virtually due to the COVID-19 pandemic, the conference took place amidst the unfolding news of a cyberattack against a major cybersecurity vendor and software vendor, underscoring vulnerabilities from cyber risk.

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