337 posts on "Liberty Street Economics"
July 10, 2025
The Rise in Deposit Flightiness and Its Implications for Financial Stability
Deposits are often perceived as a stable funding source for banks. However, the risk of deposits rapidly leaving banks—known as deposit flightiness—has come under increased scrutiny following the failures of Silicon Valley Bank and other regional banks in March 2023. In a new paper, we show that deposit flightiness is not constant over time. In particular, flightiness reached historic highs after expansions in bank reserves associated with rounds of quantitative easing (QE). We argue that this elevated deposit flightiness may amplify the banking sector’s response to subsequent monetary policy rate hikes, highlighting a link between the Federal Reserve’s balance sheet and conventional monetary policy.
July 8, 2025
The Fed’s Treasury Purchase Prices During the Pandemic
In March 2020, the Federal Reserve commenced purchases of U.S. Treasury securities to address the market disruptions caused by the pandemic. This post assesses the execution quality of those purchases by comparing the Fed’s purchase prices to contemporaneous market prices. Although past work has considered this question in the context of earlier asset purchases, the market dysfunction spurred by the pandemic means that execution quality at that time may have differed. Indeed, we find that the Fed’s execution quality was unusually good in 2020 in that the Fed bought Treasuries at prices appreciably lower than prevailing market offer prices.
July 7, 2025
The Zero Lower Bound Remains a Medium‑Term Risk
Interest rates have fluctuated significantly over time. After a period of high inflation in the late 1970s and early 1980s, interest rates entered a decline that lasted for nearly four decades. The federal funds rate—the primary tool for monetary policy in the United States—followed this trend, while also varying with cycles of economic recessions and expansions.
June 23, 2025
Reserves and Where to Find Them
Banks use central bank reserves for a multitude of purposes including making payments, managing intraday liquidity outflows, and meeting regulatory and internal liquidity requirements. Data on aggregate reserves for the U.S. banking system are readily accessible, but information on the holdings of individual banks is confidential. This makes it difficult to investigate important questions like: “Which types of banks hold reserves?” “How concentrated are they?” and “Does the distribution change over time or in response to significant events?” In this post, we summarize how non-confidential data can be used to answer these questions by providing publicly available proxies for bank-level reserves.
May 21, 2025
Nonbanks and Banks: Alone or Together?
Nonbank financial institutions (NBFIs) constitute a variety of entities—fintech companies, mutual funds, hedge funds, insurance companies, private debt providers, special purpose vehicles, among others—that have become important providers of financial intermediation services worldwide. But what is the essence of nonbank financial intermediation? Does it have any inherent advantages, and how does it interact with that performed by banks? In this Liberty Street Economics post, which is based on our recent staff report, we provide a model-based survey of recent literature on nonbank intermediation, with an emphasis on how it competes, or cooperates, with traditional banks.
May 15, 2025
The College Economy: Educational Differences in Labor Market Outcomes
It is intuitive that workers with higher levels of education tend to earn more than workers with less education. However, it is also true that workers with more education are much more likely to be employed, and this employment advantage of education has, if anything, grown in recent years. In this post, we document profound differences in labor market outcomes by educational attainment. Drawing on the Economic Heterogeneity Indicators, we find that the gap in employment rates between workers who have completed college and workers who have not is 12 percentage points—which is larger than the employment gaps between workers of different races/ethnicities or between men and women—and is wider than the pre-pandemic gap. Moreover, most of this gap and its recent movements are driven by differences in labor force participation rates rather than by differences in unemployment rates. Fostering higher labor force participation of workers without a college degree thus would be quite helpful in promoting maximum employment.
April 23, 2025
Stablecoins and Crypto Shocks: An Update
Stablecoins are crypto assets whose value is pegged to that of a fiat currency, usually the U.S. dollar. In our first Liberty Street Economics post, we described the rapid growth of stablecoins, the different types of stablecoin arrangements, and the May 2022 run on TerraUSD, the fourth largest stablecoin at the time. In a subsequent post, we estimated the impact of large declines in the price of bitcoin on cumulative net flows into stablecoins and showed the existence of flight-to-safety dynamics similar to those observed in money market mutual funds during periods of stress. In this post, we document the growth of stablecoins since 2019, including the evolution of the reported collateral backing major stablecoins. Then, we estimate the impact on the stablecoin industry of large bitcoin price increases that occurred between 2021 and 2025.
April 21, 2025
The Origins of Market Power in DeFi
In our previous Liberty Street Economics post, we introduced the decentralized finance (DeFi) intermediation chain and explained how various players have emerged as key intermediaries in the Ethereum ecosystem. In this post, we summarize the empirical results in our new Staff Report that explains how the need for transaction privacy across the DeFi intermediation chain gives rise to intermediaries’ market power.
April 16, 2025
When College Might Not Be Worth It
In our last post, we showed that the economic benefits of a college degree still far outweigh the costs for the typical graduate, with a healthy and consistent return of 12 to 13 percent over the past few decades. But there are many circumstances under which college graduates do not earn such a high return. Some colleges are much more expensive than average, and financial aid is not guaranteed no matter which college a student attends. In addition, the potentially high cost of living on campus was not factored into our estimates. Some students also may take five or six years to finish their degrees, which can significantly increase costs. Further, our calculations were based on median wages over a working life, but half of college graduates earn less than the median. Indeed, even when paying average costs, we find that a college degree does not appear to have paid off for at least a quarter of college graduates in recent decades. In this post, we consider when college might not be worth it and explore differences in the return to college by major.
Is College Still Worth It?
A college degree was once viewed as a surefire ticket to a good job and a clear pathway for upward mobility. However, concerns about the rising cost of college and the struggles of recent college graduates to find good jobs have led many Americans to lose confidence in higher education. This shift in sentiment has become even more widespread since the pandemic, as opportunities and wages have grown for those without a degree as labor markets strengthened. Indeed, many have been left wondering whether college is still worth it. In a two-part blog series, we offer an economic perspective on the value of a college degree, updating our previous research and analysis. This first post examines the costs, benefits, and return for the typical college graduate. We estimate the return to college at 12.5 percent, a rate well above the threshold for a sound investment. Our second post looks beyond the typical graduate and finds a college degree might not be worth it for at least a quarter of college graduates.
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