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Look for our next post on February 3.
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.
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.
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.
Donald P. Morgan, Maxim L. Pinkovskiy, and Davy Perlman Editor’s note: The original version of this post misstated the share of the population that is unbanked for several states. The table, interactive chart, and related text have been corrected. These changes did not alter our conclusion that across states, the share of the population that […]
In the wake of the global financial crisis, the Federal Reserve dramatically increased the size of its balance sheet—from about $900 billion at the end of 2007 to about $4.5 trillion today. At its September 2017 meeting, the Federal Open Market Committee (FOMC) announced that—effective October 2017—it would initiate the balance sheet normalization program described in the June 2017 addendum to the FOMC’s Policy Normalization Principles and Plans.
Andreas Fuster, Brian Greene, and Brett Rose In its September 20, 2017, statement, the Federal Open Market Committee (FOMC) said that, beginning in October 2017, it would initiate the balance sheet normalization program described in the June 2017 addendum to the Committee’s Policy Normalization Principles and Plans. Specifically, to reduce the Federal Reserve’s securities holdings, […]
In the spirit of this season of year-end lists of accomplishments, Liberty Street Economics offers a roundup of our most viewed posts. Our readers continued to gravitate toward timely, topical posts; our most popular explained how the Fed manages its enlarged balance sheet—a major focus of the FOMC, Congress, markets, and economists. Prompted by reader questions in response to their first post, the authors also penned a follow-up post. Another hit this year described an innovative indicator of economic growth—night light intensity measured via satellite—and used it to fact-check official Chinese growth estimates.
Following the 2016 presidential election, as noted on this blog and many other outlets, Americans’ political and economic outlook changed dramatically depending on partisan affiliation. Immediately after the election, Republicans became substantially more optimistic relative to Democrats. In this blog post, we revisit the issue of polarization over the past twelve months using data from the New York Fed’s Survey of Consumer Expectations (SCE)—also the focus of a detailed technical overview in the latest edition of the Bank’s journal, the Economic Policy Review. The overview walks readers through the design and implementation of the survey, as well as the computation of the various statistics released by the SCE team every month.
It is essential for policymakers and financial market participants to understand market expectations for the path of future policy rates because these expectations can have important implications for financial markets and the broader economy. In this post—which is meant to complement prior Liberty Street Economics posts, including Crump et al. (2014a, 2014b ) and Brodsky et al. (2016a, 2016b)—we offer some insights into estimating and interpreting market expectations for increases in the federal funds target range at upcoming meetings of the Federal Open Market Committee (FOMC).
Immediately following the presidential election of 2016, both consumer and investor sentiments were buoyant and financial markets boomed. That these sentiments affect financial asset prices is not so surprising, given past stock market evidence and episodes such as the dot-com bubble. Perhaps more surprising, the risk of corporate default—which is driven mainly by firms’ financial health but also by bond liquidity—also fell following the election, as indicated by lower yield spreads. In this post, I show that, although expectations of better corporate and macroeconomic conditions were the primary drivers of lower credit risk, improved investor sentiment also contributed.
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