Liberty Street Economics

December 7, 2018

Cryptocurrencies, Tariffs, “Too Big to Fail,” and Other Top LSE Posts of 2018

Trevor Delaney

“Cryptocurrency” hit the cultural mainstream in 2018. In March, Merriam-Webster added “cryptocurrency” to the dictionary, and in what was perhaps a greater litmus test of pop culture recognition, “bitcoin” was added to the official Scrabble dictionary in September. With such a surge in interest, it’s not too surprising that the most viewed post on Liberty Street Economics this past year focused on an issue surrounding how digital currencies operate that is not often put in the spotlight—trust. Similarly, as the subject of tariffs has become a more frequent topic of discussion in the news, readers have sought additional info, which fueled interest in another of our most viewed posts of the year. As 2019 approaches, we offer a chance to revisit these posts and the rest of our top five of 2018.

Posted at 7:00 am in Crisis, Cryptocurrencies | Permalink

December 5, 2018

Price Impact of Trades and Limit Orders in the U.S. Treasury Securities Market

Michael J. Fleming, Bruce Mizrach, and Giang Nguyen

It’s long been known that asset prices respond not only to public information, such as macroeconomic announcements, but also to private information revealed through trading. More recently, with the growth of high-frequency trading, academics have argued that limit orders—orders to buy or sell a security at a specific price or better—also contain information. In this post, we examine the information content of trades and limit orders in the U.S. Treasury securities market, following this paper, recently published in the Journal of Financial Markets and earlier as a New York Fed staff report.

Posted at 7:01 am in Financial Markets, Liquidity | Permalink

Just Released: Interactive R‑star Charts

Anna Snider

With the arrival of Bank President John Williams from the San Francisco Fed, we’re now running—and sharing the output of—models he helped develop to obtain estimates of the natural rate of interest, or r-star, for the United States and other advanced economies. In the models’ definition, r-star is the real interest rate that allows an economy to expand in line with its underlying potential while keeping inflation stable.

Posted at 7:00 am in Macroeconomics | Permalink

December 4, 2018

Just Released: Labor Markets in the Region Are Exceptionally Tight

Jaison R. Abel, Jason Bram, Richard Deitz, and Jonathan Hastings

At today’s economic press briefing, we examined labor market conditions across our District, which includes New York State, Northern New Jersey, and Fairfield County, Connecticut, as well as Puerto Rico and the U.S. Virgin Islands. As the island economies continue to recover and rebuild from the destruction caused by last year’s hurricanes, employment has edged up in Puerto Rico and stabilized in the U.S. Virgin Islands. Meanwhile, as has been true throughout the expansion, New York City remains an engine of job growth, while employment gains have been more moderate in Northern New Jersey and fairly sluggish across most of upstate New York. Nonetheless, it has become more difficult for firms to find workers throughout the New York-Northern New Jersey region. It may not be terribly surprising that labor markets have tightened in and around New York City, where job growth has been strong, but labor markets have also tightened in parts of upstate New York, even in places where there has been little or no job growth. This is because labor markets are tightening as a result of changes in both labor demand and labor supply. In upstate New York, a decline in the labor force has reduced the pool of available workers.

Posted at 10:00 am in Employment, Labor Market, New York, Regional Analysis | Permalink

December 3, 2018

Just Released: A Closer Look at Recent Tightening in Consumer Credit

Olivier Armantier, Joelle Scally, Kyle Smith, and Wilbert van der Klaauw

The Federal Reserve Bank of New York released results today from its October 2018 SCE Credit Access Survey, which provides information on consumers’ experiences with and expectations about credit demand and credit access. The survey is fielded every four months and was previously fielded in June.

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

November 29, 2018

Breaking Down TRACE Volumes Further

Doug Brain, Michiel De Pooter, Dobrislav Dobrev, Michael J. Fleming, Peter Johansson, Frank M. Keane, Michael Puglia, Anthony P. Rodrigues, and Or Shachar

Following an earlier joint FEDS Note and Liberty Street Economics blog post that examined aggregate trading volume in the Treasury cash market across venues, this post looks at volume across security type, seasoned-ness (time since issuance), and maturity. The analysis, which again relies on transactions recorded in the Financial Industry Regulatory Authority’s (FINRA) Trade Reporting and Compliance Engine (TRACE), sheds light on perceptions that some Treasury securities—in particular those that are off-the-run—may not trade very actively. We confirm that most trading volume is made up of on-the-run securities, especially in venues where the market has become more automated. However, we also find that daily average volume in off-the-run securities is still a meaningful $157 billion (27 percent of overall volume), and accounts for a large share (41 percent) of trading in the dealer-to-client venue of the market.

Posted at 7:00 am in Financial Markets | Permalink

November 28, 2018

Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?

Thomas Klitgaard and Linda Wang

The federal tax cut and the increase in federal spending at the beginning of 2018 substantially increased the government deficit, requiring a jump in the amount of new Treasury securities offerings on financial markets to fund the gap. One question is whether the government will have to rely on foreign investors to buy these securities. Data for the first half of 2018 are now available and, so far, the country has not had to increase the pace of borrowing from abroad. The current account balance, which measures how much the United States borrows from the rest of the world, has been essentially unchanged. Instead, the tax cut has boosted business saving, allowing the United States to finance the higher federal government deficit without increasing the amount borrowed from foreign investors.

Posted at 7:00 am in Balance of Payments, Macroeconomics | Permalink | Comments (4)

November 26, 2018

The Pre‑FOMC Announcement Drift: More Recent Evidence

David O. Lucca and Emanuel Moench

We had previously documented large excess returns on equities ahead of scheduled announcements of the Federal Open Market Committee (FOMC)—the Federal Reserve’s monetary policy-making body—between 1994 and 2011. This post updates our original analysis with more recent data. We find evidence of continued large excess returns during FOMC meetings, but only for those featuring a press conference by the Chair of the FOMC

Posted at 7:00 am in Financial Markets, Monetary Policy | Permalink

November 19, 2018

“Skin in the Game,” Depositor Discipline, and Bank Risk Taking

Haelim Anderson, Daniel Barth, and Dong Beom Choi

In a previous post, we argued that double liability for bank owners might not limit their risk taking, despite the extra “skin in the game,” if it also weakens depositor discipline of banks. This post, drawing on our recent working paper, looks at the interplay of those opposing forces in the late 1920s when bank liability differed across states. We find that double liability may have reduced the outflow of deposits during the crisis, but wasn’t successful in mitigating bank risk during the boom.

Posted at 7:00 am in Banks, Economic History, Financial Intermediation, New Jersey, New York | Permalink | Comments (3)

November 16, 2018

Just Released: A Look at Borrowing, Repayment, and Bankruptcy Rates by Age

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

Household debt balances increased in the third quarter of 2018, a 17th consecutive increase. Total debt balances reached $13.51 trillion, a level more than 20 percent above the trough reached in 2013, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. With today’s report we begin publishing a new set of charts that depict debt and repayment outcomes by the age of the borrower. The report and this analysis are based on the New York Fed Consumer Credit Panel (CCP), a 5 percent sample of anonymized Equifax credit reports. Here we’ll highlight three of the new charts.

Posted at 11:01 am in Credit, Household Finance | Permalink

Markets & Policy Implementation

Liberty Street Economics

Cryptocurrencies, Tariffs, “Too Big to Fail,” and Other Top LSE Posts of 2018

Price Impact of Trades and Limit Orders in the U.S. Treasury Securities Market

Just Released: Interactive R‑star Charts

Just Released: Labor Markets in the Region Are Exceptionally Tight

Just Released: A Closer Look at Recent Tightening in Consumer Credit

Breaking Down TRACE Volumes Further

Is the United States Relying on Foreign Investors to Fund Its Larger Budget Deficit?

The Pre‑FOMC Announcement Drift: More Recent Evidence

“Skin in the Game,” Depositor Discipline, and Bank Risk Taking

Just Released: A Look at Borrowing, Repayment, and Bankruptcy Rates by Age

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