Liberty Street Economics

Liberty Street Economics

March 25, 2019

Deciphering Americans’ Views on Cryptocurrencies

Sean Hundtofte, Michael Junho Lee, Antoine Martin, and Reed Orchinik

Having witnessed the dramatic rise and fall in the value of cryptocurrencies over the past year, we wanted to learn more about what motivates people to participate in this market. To find out, we included a special set of questions in the May 2018 Survey of Consumer Expectations, a project of the New York Fed’s Center for Microeconomic Data. This blog post summarizes the results of that survey, shedding light on U.S. consumers’ depth of participation in cryptocurrencies and their motives for entering this new market.

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Posted at 7:00 am in Banks, Credit, Cryptocurrencies, Financial Institutions, Financial Markets, Monetary Policy | Permalink
March 6, 2019

Assessing the Price Impact of Treasury Market Workups

Michael J. Fleming and Giang Nguyen

The price impact of a trade derives largely from its informational content. The “workup” mechanism, a trading protocol used in the U.S. Treasury securities market, is designed to mitigate the instantaneous price impact of a trade by allowing market participants to trade additional quantities of a security after a buyer and seller first agree on its price. Nevertheless, workup trades are not necessarily free of information. In this post, we assess the role of workups in price discovery, following our recent paper in the Review of Asset Pricing Studies (an earlier version of which was released as a New York Fed staff report).

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Posted at 7:00 am in Fed Funds, Financial Markets, Liquidity, Treasury | Permalink | Comments (1)
March 4, 2019

The Sensitivity of Long‑Term Interest Rates: A Tale of Two Frequencies

David O. Lucca, Samuel Hanson, and Jonathan H. Wright

The sensitivity of long-term interest rates to short-term interest rates is a central feature of the yield curve. This post, which draws on our Staff Report, shows that long- and short-term rates co-move to a surprising extent at high frequencies (over daily or monthly periods). However, since 2000, they co-move far less at lower frequencies (over six months or a year). We discuss potential explanations for this finding and its implications for the transmission of monetary policy.

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Posted at 7:00 am in Financial Markets, Macroeconomics, Monetary Policy | Permalink | Comments (1)
February 27, 2019

Global Trends in Interest Rates

Marco Del Negro, Domenico Giannone, Marc Giannoni, Andrea Tambalotti, Brandyn Bok, and Eric Qian

Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. In this blog post, we argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The magnitude of this decline has been nearly the same in all advanced economies, since their real interest rates have converged over this period. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.

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Posted at 7:00 am in Banks, Central Bank, Credit, Expectations, Federal Reserve, Financial Institutions, Financial Markets, Inflation, Liquidity, Macroeconomics, Monetary Policy, Treasury | Permalink | Comments (2)
February 25, 2019

What Can We Learn from the Timing of Interbank Payments?

Adam Copeland, Linsey Molloy, and Anya Tarascina

From 2008 to 2014 the Federal Reserve vastly increased the size of its balance sheet, mainly through its large-scale asset purchase programs (LSAPs). The resulting abundance of reserves affected the financial system in a number of ways, including by changing the intraday timing of interbank payments. In this post we show that (1) there appears to be a nonlinear relationship between the amount of reserves in the system and the timing of interbank payments, and (2) with the increase in reserves, smaller banks shifted their timing of payments more significantly than larger banks did. This result suggests that tracking the timing of payments sent by banks could provide an informative signal about the impact of the shrinking Federal Reserve balance sheet on the payments system.

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Posted at 7:00 am in Banks, Crisis, Liquidity | Permalink | Comments (1)
February 20, 2019

Stressed Outflows and the Supply of Central Bank Reserves

Ryan Bush, Adam Kirk, Antoine Martin, Philip Weed, and Patricia Zobel

Estimates of Day 1 stressed outflows suggest that reserve balances at the Fed need to be high for banks’ to meet their liquidity needs in a stress situation.

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Posted at 7:00 am in Banks, Federal Reserve, Liquidity | Permalink | Comments (1)
February 19, 2019

Just Released: Introducing the SCE Household Spending Survey

Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw

Today we are releasing new data on individuals’ experiences and expectations regarding household spending. These data have been collected every four months since December 2014 as part of our Survey of Consumer Expectations (SCE). The goal of this blog post is to introduce the SCE Household Spending Survey and highlight some of its features.

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Posted at 11:00 am in Expectations, Household Finance | Permalink
February 13, 2019

Could Rising Household Debt Undercut China’s Economy?

Hunter L. Clark and Jeffrey B. Dawson

Although there has been a notable deceleration in the pace of credit growth recently, the run-up in debt in China has been eye-popping, accounting for more than 60 percent of all new credit created globally over the past ten years. Rising nonfinancial sector debt was driven initially by an increase in corporate borrowing, which surged in 2009 in response to the global financial crisis. The most recent leg of China’s credit boom has been due to an important shift toward household lending. To better understand the rise in household debt in China and its implications for financial stability and China’s economic performance, it is important to examine the expansion in household credit, how the rise in debt compares to international experience, and the associated risks.

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Posted at 7:13 am in Credit, Household Finance, International Economics | Permalink | Comments (2)
February 12, 2019

Just Released: Auto Loans in High Gear

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

Total household debt increased modestly, by $32 billion, in the fourth quarter of 2018, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Although household debt balances have been rising since mid-2013, their sluggish growth in the fourth quarter was mainly due to a flattening in the growth of mortgage balances. Auto loans, which have been climbing at a steady clip since 2011, increased by $9 billion, boosted by historically strong levels of newly originated loans. In fact, 2018 marked the highest level in the nineteen-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports, up in nominal terms from 2017’s $569 billion. In this post, we take a closer look at the composition and performance of outstanding auto loan debt using the New York Fed’s Consumer Credit Panel (CCP), which is based on anonymized Equifax credit data and also the source for the Quarterly Report.

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Posted at 11:02 am in Household Finance | Permalink | Comments (8)
February 11, 2019

The U.S. Dollar’s Global Roles: Where Do Things Stand?

Linda S. Goldberg and Robert Lerman

Previous Liberty Street Economics analysis and New York Fed research addressed the potential implications for the United States if the dollar’s global role changed, noting that the currency might not retain its dominance forever. This post checks the status of the dollar, considering whether any erosion in the dollar’s international standing has occurred. The evidence to date is that the dollar remains the world’s dominant currency by broad margins. Alternatives have not gained extensive traction, albeit this does not rule out potential future pressures.

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Posted at 7:00 am in Central Bank, International Economics | 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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