337 posts on "Liberty Street Economics"
January 18, 2023
Inflation Disparities by Race and Income Narrow
As inflation has risen to forty-year highs, inflation inequality—disparities in the rates of inflation experienced by different demographic and economic groups– has become an increasingly important concern. In this three-part blog series, we revisit our main finding from June—that inflation inequality has increased across racial and ethnic groups—and provide estimates of differential inflation rates across groups based on income, education, age, and geographic location. We also use an updated methodology for computing inflation disparities by focusing on more disaggregated categories of spending, which corroborates our earlier findings and substantiates our conclusion that inflation inequality is a pronounced feature of the current inflationary episode.
January 17, 2023
The Recent Rise in Discount Window Borrowing
The Federal Reserve’s primary credit program—offered through its “discount window” (DW)—provides temporary short-term funding to fundamentally sound banks. Historically, loan activity has been low during normal times due to a variety of factors, including the DW’s status as a back-up source of liquidity with a relatively punitive interest rate, the stigma attached to DW borrowing from the central bank, and, since 2008, elevated levels of reserves in the banking system. However, beginning in 2022, DW borrowing under the primary credit program increased notably in comparison to past years. In this post, we examine the factors that may have contributed to this recent trend.
January 11, 2023
Foreign Banking Organizations in the United States and the Price of Dollar Liquidity
Foreign banking organizations (FBOs) in the United States play an important role in setting the price of short-term dollar liquidity. In this post, based on remarks given at the 2022 Jackson Hole Economic Policy Symposium, we highlight FBOs’ activities in money markets and discuss how the availability of reserve balances affects these activities. Understanding the dynamics of FBOs’ business models and their balance sheet constraints helps us monitor the evolution of liquidity conditions during quantitative easing (QE) and tightening (QT) cycles.
Posted at 7:00 am in Banks, Central Bank, Financial Intermediation, Financial Markets, Liquidity | Permalink | Comments (1)
January 9, 2023
Bank Profits and Shareholder Payouts: The Repurchases Cycle
During the height of the COVID-19 pandemic, the Federal Reserve placed restrictions on large banks’ dividends and share repurchases. These restrictions were intended to enhance banks’ resiliency by bolstering their capital in light of the very uncertain economic environment and concerns that banks might face very large losses should bad-case scenarios come to pass. When it became clear that the outlook had improved and that the losses banks experienced were unlikely to threaten their stability, the Federal Reserve removed these restrictions. In this post, we look at what happened to large banks’ dividends and share repurchases during and after the pandemic-era restrictions, tracking these shareholder payouts relative to bank profits to understand how these payments impacted large banks’ capital during this period.
January 6, 2023
Global Supply Chain Pressure Index: The China Factor
In a January 2022 post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. In this post, we review GSCPI readings through December 2022, and then briefly discuss the drivers of recent moves in the index. While supply chain disruptions have significantly diminished over the course of 2022, the reversion of the index toward a normal historical range has paused over the past three months. Our analysis attributes the recent pause largely to the pandemic in China amid an easing of “Zero COVID” policies.
January 5, 2023
The Layers of Inflation Persistence
In a recent post, we introduced the Multivariate Core Trend (MCT), a measure of inflation persistence in the core sectors of the personal consumption expenditure (PCE) price index. With data up to February 2022, we used the MCT to interpret the nature of post-pandemic price spikes, arguing that inflation dynamics were dominated by a persistent component largely common across sectors, which we estimated at around 5 percent. Indeed, over the year, inflation proved to be persistent and broad based, and core PCE inflation is likely to end 2022 near 5 percent. So, what is the MCT telling us today? In this post, we extend our analysis to data through November 2022 and detect signs of a decline in the persistent component of inflation in recent data. We then dissect the layers of inflation persistence to fully understand that decline.
December 22, 2022
Supply Chains, Student Debt, and Stablecoins—The Top 5 Liberty Street Economics Posts of 2022
“Kitchen table” issues were on the minds of our readers in 2022, though what was labeled as such was perhaps a bit broader than in the past. Supply chains—now firmly placed on the radar of Main Street—were the subject of the year’s top post by number of page views and accounted for three of the top five (we’ll consider them as one for this roundup). Student debt forgiveness and inflation were also in the news, drawing readers to our preview of various possibilities for the (subsequently announced) federal student loan forgiveness program and a quarterly update of a New York Fed economic forecast model. Posts on more technical topics were popular as well, including an update on the Federal Reserve’s balance sheet “runoff” and a discussion of stablecoins. Underscoring their broad appeal, the year’s top two posts rank among the top five in the history of Liberty Street, which dates back to 2011. Read on to see which posts resonated most with readers.
Posted at 7:00 am in DSGE, Federal Reserve, International Economics, Student Loans, Supply Chain | Permalink
December 21, 2022
Can Decentralized Finance Provide More Protection for Crypto Investors?
Several centralized crypto entities failed in 2022, resulting in the cascading failure of other crypto firms and raising questions about the protection of crypto investors. While the total amount invested in the crypto sector remains small in the United States, more than 10 percent of all Americans are invested in cryptocurrencies. In this post, we examine whether migrating crypto activities from centralized platforms to decentralized finance (DeFi) protocols might afford investors better protection, especially in the absence of regulatory changes. We argue that while DeFi provides some benefits for investors, it also introduces new risks and so more work is needed to make it a viable option for mainstream investors.
December 19, 2022
Highlights from the Fifth Bi‑annual Global Research Forum on International Macroeconomics and Finance
The COVID-19 pandemic, geopolitical tensions, and distinct economic conditions bring challenges to economies worldwide. These key themes provided a backdrop for the fifth bi-annual Global Research Forum on International Macroeconomics and Finance, organized by the European Central Bank (ECB), the Federal Reserve Board, and Federal Reserve Bank of New York in New York in November. The papers and discussions framed important issues related to the global economy and financial markets, and explored the implications of policies that central banks and other official sector bodies take to address geopolitical developments and conditions affecting growth, inflation, and financial stability. A distinguished panel of experts shared diverse perspectives on the drivers of and prospects for inflation from a global perspective. In this post, we discuss highlights of the conference. The event page includes links to videos for each session.
Posted at 7:00 am in Exchange Rates, Exports, Inflation, International Economics, Macroeconomics, Monetary Policy, Supply Chain | Permalink
December 16, 2022
The New York Fed DSGE Model Forecast—December 2022
This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since September 2022.
RSS Feed
Follow Liberty Street Economics
