Liberty Street Economics

Liberty Street Economics

Look for our next post on August 5.

February 13, 2018

Just Released: Great Recession’s Impact Lingers in Hardest‑Hit Regions

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

The New York Fed’s Center for Microeconomic Data today released our Quarterly Report on Household Debt and Credit for the fourth quarter of 2017. Along with this report, we have posted an update of state-level data on balances and delinquencies for 2017. Overall aggregate debt balances increased again, with growth in all types of balances except for home equity lines of credit. In our post on the first quarter of 2017 we reported that overall balances had surpassed their peak set in the third quarter of 2008—the result of a slow but steady climb from several years of sharp deleveraging during the Great Recession.

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Posted at 11:00 am in Credit, Household Finance, Housing, Recession, Regional Analysis | Permalink | Comments (2)
February 12, 2018

Does More “Skin in the Game” Mitigate Bank Risk‑Taking?

Haelim Anderson, Daniel Barth, and Dong Beom Choi

It is widely said that a lack of “skin in the game” would distort lenders’ incentives and cause a moral hazard problem, that is, excessive risk-taking. If so, does more skin in the game—in the form of extended liability—reduce bankers’ risk-taking? In order to examine this question, we investigate historical data prior to the Great Depression, when bank owners’ liability for losses in the event of bank failure differed by state and primary regulator. This post describes our preliminary findings.

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Posted at 7:00 am in Banks, Credit, Economic History, Financial Institutions, Regulation, Systemic Risk | Permalink | Comments (3)
February 9, 2018

Hey, Economist! What Do Cryptocurrencies Have to Do with Trust?

Michael Lee and Antoine Martin

Bitcoin and other “cryptocurrencies” have been much in the news lately, in part because of their wild gyrations in value. Michael Lee and Antoine Martin, economists in the New York Fed’s Money and Payment Studies function, have been following cryptocurrencies and agreed to answer some questions about digital money.

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Posted at 7:00 am in Banks, Central Bank, Cryptocurrencies, Financial Markets, Hey, Economist!, Monetary Policy | Permalink
February 7, 2018

A DSGE Perspective on Safety, Liquidity, and Low Interest Rates

Marco Del Negro, Domenico Giannone, Marc Giannoni, Abhi Gupta, Pearl Li, and Andrea Tambalotti

Marco Del Negro, Domenico Giannone, Marc Giannoni, Abhi Gupta, Pearl Li, and Andrea Tambalotti Third of three posts The preceding two posts in this series documented that interest rates on safe and liquid assets, such as U.S. Treasury securities, have declined significantly in the past twenty years. Of course, short-term interest rates in the United […]

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Posted at 7:00 am in DSGE, Liquidity, Macroeconomics, Monetary Policy | Permalink
February 6, 2018

A Time‑Series Perspective on Safety, Liquidity, and Low Interest Rates

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

Brandyn Bok, Marco Del Negro, Domenico Giannone, Marc Giannoni, and Andrea Tambalotti Second of three posts The previous post in this series discussed several possible explanations for the trend decline in U.S. real interest rates since the late 1990s. We noted that while interest rates have generally come down over the past two decades, this […]

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Posted at 7:00 am in Liquidity, Macroeconomics, Monetary Policy | Permalink
February 5, 2018

A New Perspective on Low Interest Rates

Marco Del Negro, Domenico Giannone, Marc Giannoni, and Andrea Tambalotti

Marco Del Negro, Domenico Giannone, Marc Giannoni, and Andrea Tambalotti First of three posts Interest rates in the United States have remained at historically low levels for many years. This series of posts explores the forces behind the persistence of low rates. We briefly discuss some of the explanations advanced in the academic literature, and […]

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Posted at 7:00 am in Liquidity, Macroeconomics, Monetary Policy, Treasury | Permalink | Comments (2)
February 2, 2018

New Report Assesses Structural Changes in Global Banking

Nicola Cetorelli, B. Gerard Dages, Paul Licari, and Afshin Taber

The Committee on the Global Financial System, made up of senior officials from central banks around the world and chaired by New York Fed President William Dudley, recently released a report on “Structural Changes in Banking after the Crisis.” The report includes findings from a wide-ranging study documenting the significant structural adjustments in banking systems around the world in response to regulatory, technological, and market changes after the crisis, while also assessing their implications for financial stability, credit provision, and capital markets activity. It includes a new banking database spanning over twenty-one countries from 2000 to 2016 that could serve as a valuable reference for further analysis. Overall, the study concludes that the changed regulatory and market environment since the crisis has led banks to alter their business models and balance sheets in ways that make them more resilient but also less profitable, while continuing their role as intermediaries providing financial services to the real economy.

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Posted at 7:00 am in Banks, Credit, Financial Institutions, Financial Intermediation, Regulation, Systemic Risk | Permalink | Comments (1)
January 17, 2018

Did Import Competition Boost Household Debt Demand?

Jean-Noel Barrot, Erik Loualiche, Matthew Plosser, and Julien Sauvagnat

In the years preceding the Great Recession, the United States experienced a dramatic rise in household debt and an unprecedented increase in import competition. In a recent staff report, we outline a link between these two seemingly unrelated phenomena. We argue that the displacement of workers exposed to import competition fueled their demand for mortgage credit, which left many households more vulnerable to the eventual downturn in the housing market.

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Posted at 7:00 am in Credit, International Economics | Permalink
January 16, 2018

What about Spending on Consumer Goods?

Jonathan McCarthy

In a recent Liberty Street Economics post, I showed that one major category of consumer spending—spending on discretionary services such as recreation, transportation, and household utilities—behaved very differently in the 2007-09 recession and subsequent recovery than in previous business cycles: specifically, it fell more steeply and has recovered much more slowly.

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Posted at 7:00 am in Macroeconomics, Recession | Permalink
January 12, 2018

Beginning to Gauge Maria’s Effect on Puerto Rico’s Economy

Jason Bram and Lauren Thomas

Just two weeks after most of Puerto Rico dodged the proverbial bullet, missing the brunt of Hurricane Irma, the island was devastated by Maria—one of the ten strongest Atlantic hurricanes on record. Making landfall on September 20, 2017, the storm caused not only massive physical destruction and tragic loss of life but also widespread and persistent power outages, shortages of potable (and even nonpotable) running water, and disruptions to telecommunications and travel, among other issues. With the storm boosting costs and disrupting activity, the short-term economic impact is clearly significant. But an even greater concern is that the adverse short-term effects of the storm, overlaid on an already shrinking economy, may evolve into long-term adverse effects. In this post, we focus on the magnitude, duration, breadth and nature of the economic disruptions, as measured mostly by employment.

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Posted at 7:00 am in Puerto Rico, Regional Analysis | 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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