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Economic Research

Liberty Street Economics
Introducing the SCE Household Spending Survey
The New York Fed releases new data on individuals’ experiences and expectations regarding household spending—collected since December 2014 as part of the Center for Microeconomic Data’s Survey of Consumer Expectations (SCE). This post introduces the SCE Household Spending Survey and highlights some of its features, among them, detailed information about expectations for year-ahead changes in spending and information on the expected spending or saving response to an unanticipated increase or decline in income.
By Gizem Kosar, Kyle Smith, Wilbert van der Klaauw
Auto Loans in High Gear
Total household debt increased modestly, by $32 billion, in the fourth quarter of 2018, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. The year as a whole, however, saw the highest level of newly originated loans in the nineteen-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports.
By Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
The U.S. Dollar’s Global Roles: Where Do Things Stand?
Our bloggers’ examination of the dollar’s global roles suggests that the international monetary architecture has remained broadly unchanged. Although the dollar’s international status may have declined in some pockets, overall the dollar remains dominant. Nevertheless, recent trends bear watching as history suggests that a currency’s dominant status is not immutable.
By Linda S. Goldberg and Robert Lerman
The New York Fed DSGE Model Forecast—January 2019
Our bloggers present the latest quarterly update to the economic forecasts generated by the New York Fed’s dynamic stochastic general equilibrium (DSGE) model. The current 2019 Q4/Q4 GDP growth forecast of 1.6 percent is lower than the projection of 1.9 percent made in October 2018.
By Michael Cai, Marco Del Negro, Ethan Matlin, and Reca Sarfati
Where Are Manufacturing Jobs Coming Back?
Our bloggers continue their examination of the rebound in manufacturing jobs in recent years by taking a closer look at the areas of the country where these job gains are occurring. Although there were gains in places that are home to growing manufacturing industries, like auto-related production in parts of Ohio and Indiana, the manufacturing job base has continued to decline in most of the metro areas in the New York-Northern New Jersey region, with the notable exception of Albany.
By Jaison R. Abel and Richard Deitz
Recent Publications
The Long and Short of It: The Post-Crisis Corporate CDS Market
The 2007–09 financial crisis highlighted the vulnerability of financial institutions linked by a complex web of credit default swap (CDS) contracts, sparking a wave of regulatory changes to the structure of the market. In this paper, the authors provide broad evidence on the evolution of the CDS market in the post-crisis period, document the properties of participants’ exposures to corporate CDS over time, and study the differential pricing of transactions between different types of counterparties.
Nina Boyarchenko, Anna M. Costello, and Or Shachar, Staff Report 879, February 2019
Rational Inattention in Hiring Decisions
The ratio of unemployed job-seekers to each job opening tripled during the Great Recession. Even so, employers frequently complained of an inability to find suitable workers. In this paper, the authors provide an information-based theory of fluctuations in job matching efficiency. During recessions, higher losses from hiring unsuitable workers cause firms to be more selective. When firms cannot obtain sufficient information about applicants, they grow cautious and accept fewer applicants to minimize losses from unsuitable hires. Pro-cyclical acceptance rates drive a wedge between meeting and hiring rates, explaining fluctuations in matching efficiency.
Sushant Acharya and Shu Lin Wee, Staff Report 878, February 2019
Monetary Policy Frameworks and the Effective Lower Bound on Interest Rates
In this paper, the authors apply a standard New Keynesian model to analyze the effects of monetary policy in the presence of a low natural rate of interest and a lower bound on interest rates. Under a standard inflation-targeting approach, inflation expectations will become anchored at a level below the inflation target, which in turn exacerbates the deleterious effects of the lower bound on the economy.
Thomas Mertens and John C. Williams, Staff Report 877, January 2019
Robust Inference in Models Identified via Heteroskedasticity
The author provides a comprehensive framework allowing researchers to conduct inference robust to weak identification in models identified via heteroskedasticity. He describes and models the deficiencies that can lead to such weak identification, and shows that these properties can significantly impact the reliability of standard inference in empirical data. The author also proposes tests to detect weak identification, allowing researchers to determine whether they should consider these concerns.
Daniel Lewis, Staff Report 876, December 2018
The Marginal Propensity to Hire
The rise in unemployment following the financial crisis underscored the importance of links between financial and labor markets. In this paper, the author exploits the idea that, when financial constraints bind, a firm adjusts its employment in response to cash flow shocks, which the author labels the marginal propensity to hire (MPH). Using a novel combination of three large data sets from the United Kingdom, the study shows that for every additional £1 of cash flow, on average 39 pence are spent on employment.
Davide Melcangi, Staff Report 875, December 2018
Special Issue: The Appropriate Role of Government in U.S. Mortgage Markets
The U.S. mortgage finance system was one of the focal points of the 2007-08 financial crisis, yet legislative decisions about the appropriate role of the federal government in the system remain unsettled. This special volume of the Economic Policy Review explores key components of housing finance reform. The eight articles were developed from presentations delivered at “The Workshop on the Appropriate Government Role in U.S. Mortgage Markets,” held at the Federal Reserve Bank of New York in April 2017.
Local Banks, Credit Supply, and House Prices
The author studies the effects of an increase in the supply of local mortgage credit on local house prices and employment by exploiting a natural experiment from Switzerland: Losses in U.S. security holdings triggered a migration of customers from a large, universal bank (UBS) to local mortgage lenders in mid-2008. He shows that house prices in neighborhoods immediately around exogenously shocked local banks grow over 50 percent more than house prices around unaffected banks. There was also an increase in the number of employees at small firms, reliant on real estate collateral, in these neighborhoods.
Kristian Blickle, Staff Report 874, November 2018