329 posts on "Liberty Street Economics"
December 21, 2023
Where Is R‑Star and the End of the Refi Boom: The Top 5 Posts of 2023
The topics covered on Liberty Street Economics in 2023 hit many themes, reflecting the range of research interests of the more than sixty staff economists at the New York Fed and their coauthors. We published 122 posts this year, exploring important subjects such as equitable growth and the economic impacts of extreme weather, alongside our deep and long-standing coverage of topics like inflation, banking system vulnerability, international economics, and monetary policy effects. As we close out the year, we’re taking a look back at the top five posts. See you again in 2024.
December 20, 2023
Does Trade Uncertainty Affect Bank Lending?
The recent era of global trade expansion is over. Faced with increased geopolitical risk, fragile foreign supply chains, and uncertainties in the international trade environment, firms are postponing entry into foreign markets and pulling back from foreign activities (IMF 2023). Besides its direct effects on real activity, the recent rise in trade uncertainty has potentially important implications for the financial sector. This post describes how the lending activities of U.S. banks were affected by the rise in trade uncertainty during the 2018-19 “trade war.” In particular, banks that were more exposed to trade uncertainty contracted lending to all of their domestic nonfinancial business borrowers, regardless of whether these borrowers were facing high or low uncertainty themselves. Furthermore, banks’ lending strategies exhibited the type of “wait-and-see” behavior usually found in corporate firms facing investment decisions under uncertainty, and the lending contraction was larger for those banks that were more financially constrained.
December 19, 2023
Dropping Like a Stone: ON RRP Take‑up in the Second Half of 2023
Take-up at the Overnight Reverse Repo Facility (ON RRP) has halved over the past six months, declining by more than $1 trillion since June 2023. This steady decrease follows a rapid increase from close to zero in early 2021 to $2.2 trillion in December 2022, and a period of relatively stable balances during the first half of 2023. In this post, we interpret the recent drop in ON RRP take-up through the lens of the channels that we identify in our recent Staff Report as driving its initial increase.
December 18, 2023
Hey, Economist! Outgoing Advisor Antoine Martin Reflects on How His New York Fed Perch Has Shaped His Work
Antoine Martin, an economist and financial stability advisor in the New York Fed’s Research and Statistics Group, will soon take up a new post at the Swiss National Bank (SNB), as head of its third department covering money markets/foreign exchange (FX). In that role, Martin, who is originally from Switzerland, also becomes one of three members of that central bank’s rate-setting governing board. Readers of Liberty Street Economics will be familiar with his byline, as he has written more than sixty posts presenting new research findings and policy analysis, all with an eye for breaking down the most complicated topics in clear terms. He took a few questions from publications editor Anna Snider about his experiences and future plans as he prepares to move on.
November 30, 2023
FHA First‑Time Buyer Homeownership Sustainability: An Update
An important part of the mission of the Federal Housing Administration (FHA) is to provide affordable mortgages that both promote the transition from renting to owning and create “sustainable” homeownership. The FHA has never defined what it means by sustainability. However, we developed a scorecard in 2018 that tracks the long-term outcomes of FHA first-time buyers (FTBs) and update it again in this post. The data show that from 2011 to 2016 roughly
21.8 percent of FHA FTBs failed to sustain their homeownership.
November 21, 2023
A Bayesian VAR Model Perspective on the Lagged Effect of Monetary Policy
Over the last few years, the U.S. economy has experienced unusually high inflation and an unprecedented pace of monetary policy tightening. While inflation has fallen recently, it remains above target, and the economy continues to expand at a robust pace. Does the resilience of the U.S. economy imply that monetary policy has been ineffectual? Or does it reflect that policy acts with “long and variable lags” and so we haven’t yet observed the full effect of the monetary tightening that has already taken place? Using a Bayesian vector autoregressive (BVAR) model, we show that economic activity has, indeed, been substantially stronger than would have been anticipated considering the rapid policy tightening. Still, the model expects a significant slowdown in 2024-25, even though short-term interest rates are forecasted to fall.
November 16, 2023
Small Business Recovery after Natural Disasters in the Fed’s Second District
A previous Liberty Street Economics post found that minority-owned small businesses in the Federal Reserve’s Second District have been particularly vulnerable to natural disasters. Here we focus on the aftermath of disasters (such as hurricanes, floods, wildfires, droughts, and winter storms) and examine disparities in the ability of these firms to reopen their businesses and access disaster relief. Our results indicate that while white- and minority-owned firms remain closed for similar durations, the latter are more reliant on external funding from government and private sources to cope with disaster losses.
November 15, 2023
How Do Natural Disasters Affect Small Business Owners in the Fed’s Second District?
In this post, we follow up on the previous Liberty Street Economics post in this series by studying other impacts of extreme weather on the real sector. Data from the Federal Reserve’s Small Business Credit Survey (SBCS) shed light on how small businesses in the Second District are impacted by natural disasters (such as hurricanes, floods, wildfires, droughts, and winter storms). Among our findings are that increasing shares of small business firms in the region sustain losses from natural disasters, with minority-owned firms suffering losses at a disproportionately higher rate than white-owned firms. For many minority-owned firms, these losses make up a larger portion of their total revenues. In a companion post, we will explore the post-disaster recovery of small firms in the Second District: how long do they remain closed and what are their sources of disaster relief?
November 14, 2023
Flood Risk and Firm Location Decisions in the Fed’s Second District
The intensity, duration, and frequency of flooding have increased over the past few decades. According to the Federal Emergency Management Agency (FEMA), 99 percent of U.S. counties have been impacted by a flooding event since 1999. As the frequency of flood events continues to increase, the number of people, buildings, and agriculture exposed to flood risk is only likely to grow. As a previous post points out, measuring the geographical accuracy of such risk is important and may impact bank lending. In this post, we focus on the distribution of flood risk within the Federal Reserve’s Second District and examine its effect on establishment location decisions over the last two decades.
Posted at 7:00 am in Climate Change | Permalink
November 10, 2023
Potential Flood Map Inaccuracies in the Fed’s Second District
The National Flood Insurance Program (NFIP) flood maps, which designate areas at risk of flooding, are updated periodically through the Federal Emergency Management Agency (FEMA) and community efforts. Even so, many maps are several years old. As the previous two posts in the Extreme Weather series show, climate-related risks vary geographically. It is therefore important to produce accurate maps of such risks, like flooding. In this post we use detailed data on the flood risk faced by individual dwellings as well as digitized FEMA flood maps to tease out the degree to which flood maps in the Second District are inaccurate. Since inaccurate maps may leave households or banks exposed to the risk of uninsured flood damage, understanding map inaccuracies is key. We show that, when aggregated to the census tract level, a large number of maps do not fully capture flood risk. However, we are also able to show that updates do in fact improve map quality.
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