On April 18, 2016, the New York Fed hosted a conference on current and future policy directions for the linked economies of Europe and the United States. “The Transatlantic Economy: Convergence or Divergence,” organized jointly with the Centre for Economic Policy Research and the European Commission, brought together U.S. and Europe-based policymakers, regulators, and academics to discuss a series of important issues: Are the economies of the euro area and the United States on a convergent or divergent path? Are financial regulatory reforms making the banking and financial structures more similar? Will this imply a convergence in macroprudential policies? Which instruments do the United States and the euro area have at their disposal to raise investment, spur productivity, and avoid secular stagnation? In this post, we summarize the principal themes and findings of the conference discussion.
Look for our next post on March 23.
At the N.Y. Fed: The Transatlantic Economy: Convergence or Divergence?
Just Released: 2016 SCE Housing Survey Shows Modest Decline in Home Price Expectations
The Federal Reserve Bank of New York’s 2016 SCE Housing Survey indicates that home price growth expectations have declined somewhat relative to last year, but the majority of households still view housing as a good financial investment. Mortgage rate expectations have also declined since last year’s survey, and renters now perceive that it has become somewhat less difficult to get a mortgage if they wanted to buy a home.
Revisiting the Case for International Policy Coordination
Prompted by the U.S. financial crisis and subsequent global recession, policymakers in advanced economies slashed interest rates dramatically, hitting the zero lower bound (ZLB), and then implemented unconventional policies such as large-scale asset purchases. In emerging economies, however, the policy response was more subdued since they were less affected by the financial crisis. As a result, capital flows from advanced to emerging economies increased markedly in response to widening interest rate differentials. Some emerging economies reacted by adopting measures to slow down capital inflows, acting under the presumption that these flows were harmful. This type of policy response has reignited the debate over how to moderate international spillovers.
The Macro Effects of the Recent Swing in Financial Conditions
Credit conditions tightened considerably in the second half of 2015 and U.S. growth slowed. We estimate the extent to which tighter credit conditions last year were responsible for the slowdown using the FRBNY DSGE model. We find that growth would have slowed substantially more had the Federal Reserve not delayed liftoff in the federal funds rate.
Just Released: Hints of Increased Hardship in America’s Oil‑Producing Counties
Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw Today, the New York Fed released the Quarterly Report on Household Debt and Credit for the first quarter of 2016. Overall debt saw one of its larger increases since deleveraging ended, while delinquency rates for the United States continued to improve and remain […]
The FRBNY DSGE Model Forecast—May 2016
The May 2016 forecast of the Federal Reserve Bank of New York’s (FRBNY) dynamic stochastic general equilibrium (DSGE) model remains broadly in line with those of our two previous semiannual reports (see our May 2015 and December 2015 posts). In the past year, the headwinds that contributed to slower growth in the aftermath of the financial crisis finally began to abate. However, the widening of credit spreads associated with swings in financial markets in the second half of 2015 and the first few months of this year have had a negative impact on economic activity. Despite this setback, the model expects a rebound in growth in the second half of the year, so that the medium-term forecast remains, as in the December post, one of steady, gradual economic expansion. The model also continues to predict gradual progress in the inflation rate toward the Federal Open Market Committee’s (FOMC) long-run target of 2 percent.
Historical Echoes: When Fed Chairs Expound on Life
J.K. Rowling, David Byrne, Eric Idle—These captivating figures delivered commencement addresses at Harvard, Columbia University and Whitman College, respectively. Of course, Federal Reserve chairs give commencement speeches too, and good ones. NPR maintains a list of some standouts, “The Best Commencement Speeches, Ever” (this is a cool interactive website that enables you to search by name, school, year, or by theme—play, inner voice, embrace failure, change the world, make art, etc.). Its roundup of graduation season remarks includes Janet Yellen’s 2014 speech at New York University, and Ben Bernanke’s 2013 speech at Princeton. Another list, “Best Commencement Speeches Of All Time,” includes Alan Greenspan’s 1999 commencement speech at Harvard.
Just Released: Presenting U.S. Economy in a Snapshot at Our Economic Press Briefing
Monitoring the economic and financial landscape is a difficult task. Part of the challenge stems from simply having access to data. Even if this requirement is met, there is the issue of identifying the key economic data releases and financial variables to focus on among the vast number of available series. It is also critical to be able to interpret movements in the data and to know their implications for the economy. Since last June, New York Fed research economists have been helping on this front, by producing U.S. Economy in a Snapshot, a series of charts and commentary capturing important economic and financial developments. At today’s Economic Press Briefing, we took reporters covering the Federal Reserve through the story of how and why the Snapshot is produced, and how it can be helpful in understanding the U.S. economy.
International Evidence on the Use and Effectiveness of Macroprudential Policies
Ozge Akinci In recent years, policymakers in advanced and emerging economies have employed a variety of macroprudential policy tools—targeted rules or requirements that enhance the stability of the financial system as a whole by addressing the interconnectedness of individual financial institutions and their common exposure to economic risk factors. To examine the foreign experience with […]
Did the Supervisory Guidance on Leveraged Lending Work?
Financial regulatory agencies issued guidance intended to curtail leveraged lending—loans to firms perceived to be risky—in March of 2013. In issuing the guidance, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation highlighted several facts that were reminiscent of the mortgage market in the years preceding the financial crisis: rapid growth in the volume of leveraged lending, increased participation by unregulated investors, and deteriorating underwriting standards. Our post shows that banks, in particular the largest institutions, cut leveraged lending while nonbanks increased such lending after the guidance. During the same period of time, nonbanks increased their borrowing from banks, possibly to finance their growing leveraged lending activity.
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