Liberty Street Economics

Just Released: Auto Lending Keeps Pace as Delinquencies Mount in Auto Finance Sector

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

Total household debt increased by $116 billion to reach $12.96 trillion in the third quarter of 2017, according to the latest Quarterly Report on Household Debt and Credit released today by the New York Fed’s Center for Microeconomic Data. Household debt has been growing since mid-2013, boosted in part by steady growth in auto loan balances, which have grown for twenty-six consecutive quarters thanks to record-high levels of newly originated loans. Although new vehicle sales had begun to slump over the summer after several strong years of growth, September and October saw a rebound in sales, ending with over 18 million vehicles sold (seasonally adjusted at an annualized rate), and auto loan originations in the third quarter were commensurate with these numbers. In this post, we revisit the state of auto lending and auto loan performance, using the New York Fed Consumer Credit Panel which is based on Equifax credit data.

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

The Low Volatility Puzzle: Are Investors Complacent?

David O. Lucca, Daniel Roberts, and Peter Van Tassel

In recent months, some analysts and policymakers have raised concerns about the unusually low level of stock market volatility. For example, in the June Federal Open Market Committee (FOMC) minutes “a few participants expressed concern that subdued market volatility, coupled with a low equity premium, could lead to a buildup of risks to financial stability.” In this post, we review this concern and find the evidence on investor complacency is mixed. On one hand, we present a view suggesting that historical volatility may have been abnormally high, rather than current volatility being abnormally low. On the other hand, we find that estimates of the volatility risk premium are somewhat low, which is consistent with the view that investor risk tolerance has increased. We extend this analysis in a related post publishing on Wednesday.

Posted at 7:00 am in Financial Markets | Permalink | Comments (2)

Understanding Permanent and Temporary Income Shocks

Fatih Karahan, Sean Mihaljevich, and Laura Pilossoph

The earnings of 200 million U.S. workers change each year for various reasons. Some of these changes are anticipated while others are more unexpected. Although many of these changes may be due to pleasant surprises—such as receiving salary raises and promotions—others involve disappointments—such as falling into unemployment. Arguably, some of these factors have rather short-lived effects on an individual’s earnings, whereas others may have permanent effects. Many labor economists have been interested in these various shocks to earnings. How big are the more permanent shocks to earnings? How large are they relative to those that are temporary in nature? What are the sources of these shocks? In this blog post, we exploit a novel data set that enables us to explore the properties of earnings shocks: their magnitudes as well as their origins.

Posted at 7:00 am in Expectations, Household Finance | Permalink

Mission Almost Impossible: Developing a Simple Measure of Pass‑Through Efficiency

Gara Afonso, Adam Biesenbach, and Thomas M. Eisenbach

Short-term credit markets have evolved significantly over the past ten years in response to unprecedentedly high levels of reserve balances, a host of regulatory changes, and the introduction of new monetary policy tools. Have these and other developments affected the way monetary policy shifts “pass through” to money markets and, ultimately, to households and firms? In this post, we discuss a new measure of pass‑through efficiency, proposed by economists Darrell Duffie and Arvind Krishnamurthy at the Federal Reserve’s 2016 Jackson Hole summit.

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

What Explains Shareholder Payouts by Large Banks?

Beverly Hirtle

On June 28, the Federal Reserve released the latest results of the Comprehensive Capital Analysis and Review (CCAR), the supervisory program that assesses the capital adequacy and capital planning processes of large, complex banking companies.

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

Discretionary Services Spending Has Finally Made It Back (to 2007)

Jonathan McCarthy

The current economic expansion is now the third-longest expansion in U.S. history (based on National Bureau of Economic Research [NBER] dating of U.S. business cycles). Even so, average growth in this expansion—a 2.1 percent annual rate—has been extraordinarily weak.

Posted at 7:00 am in Macroeconomics, Recession | Permalink | Comments (2)

Upstate New York’s Expansion Is Losing Steam

Jaison R. Abel and Richard Deitz

All in all, the upstate New York economy fared pretty well during the last business cycle.

Posted at 7:00 am in Employment, Labor Market, New York, Regional Analysis | Permalink

Just Released: New York Fed Markets Data Dashboard

Antoine Martin, Susan McLaughlin, and Jordan Pollinger

The Federal Reserve Bank of New York releases data on a number of market operations, reference rates, monetary policy expectations, and Federal Reserve securities portfolio holdings. These data are released at different times, for different types of securities or rates, and for different audiences.

Posted at 10:00 am in Federal Reserve, Financial Markets, Monetary Policy, Repo | Permalink

U.S. Monetary Policy as a Changing Driver of Global Liquidity

Stefan Avdjiev, Leonardo Gambacorta, Linda S. Goldberg, and Stefano Schiaffi

International capital flows channel large volumes of funds across borders to both public and private sector borrowers. As they are critically important for economic growth and financial stability, understanding their main drivers is crucial for both policymakers and researchers. In this post, we explore the evolving impact of changes in U.S. monetary policy on global liquidity.

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

How Is Online Shopping Affecting Retail Employment?

Jason Bram and Nicole Gorton

It’s been said that if you want to know how the economy is doing, look at how many people are carrying shopping bags. That adage may not hold so well today. The rise of the internet and e-commerce over the past two decades has chipped away at the market share of “brick and mortar” retailers.

Posted at 7:00 am in Labor Market, Regional Analysis | Permalink | Comments (2)

Markets & Policy Implementation

Liberty Street Economics

Just Released: Auto Lending Keeps Pace as Delinquencies Mount in Auto Finance Sector

The Low Volatility Puzzle: Are Investors Complacent?

Understanding Permanent and Temporary Income Shocks

Mission Almost Impossible: Developing a Simple Measure of Pass‑Through Efficiency

Discretionary Services Spending Has Finally Made It Back (to 2007)

Upstate New York’s Expansion Is Losing Steam

Just Released: New York Fed Markets Data Dashboard

U.S. Monetary Policy as a Changing Driver of Global Liquidity

How Is Online Shopping Affecting Retail Employment?

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