Tweets by @NYFedResearch

Economic Research

Consumers Increasingly Expect Additional Government Support amid COVID-19 Pandemic
The April SCE Public Policy Survey, from the New York Fed’s Center for Microeconomic Data, shows large movements in consumers’ expectations regarding future changes in several assistance and social insurance programs, as well as in taxes and fees. Among the results: The average likelihood of an increase in federal welfare benefits rose the most—around 20 percentage points—compared to December 2019.
By Gizem Koşar, Kyle Smith, Wilbert van der Klaauw
The Primary and Secondary Market Corporate Credit Facilities
The authors document the dislocations in the corporate bond market that have motivated the creation of the Primary Market and Secondary Market Corporate Credit Facilities and explain how they expect these facilities to support U.S. businesses and their employees—both through the COVID-related disruptions and beyond, when the economy recovers.
By Nina Boyarchenko, Richard Crump, Anna Kovner, Or Shachar, and Peter Van Tassel
Have the Fed Swap Lines Reduced Dollar Funding Strains during the COVID-19 Outbreak?
In March, the Federal Reserve made changes to its swap line facilities with foreign central banks to enhance the provision of dollars to global funding markets. This post summarizes these changes and shows that they were effective at bringing down dollar funding strains, helping to facilitate the supply of credit to households and businesses, both domestically and abroad.
By Nicola Cetorelli, Linda S. Goldberg, and Fabiola Ravazzolo
What Do Financial Conditions Tell Us about Risks To GDP Growth?
The economic fallout of efforts to contain the COVID-19 outbreak has been sharp. Real U.S. GDP growth in the first quarter (advance estimate) was the worst since the 2008 financial crisis. The authors estimate the risks around the modal forecast of GDP growth as a function of financial conditions. Although GDP growth will depend primarily on the speed with which many activities can resume, improved financial conditions in April have reduced the likelihood that financial conditions and real growth will jointly deteriorate in the next few quarters.
By Patrick Adams, Tobias Adrian, Nina Boyarchenko, Domenico Giannone, Nellie Liang, and Eric Qian
The Paycheck Protection Program Liquidity Facility (PPPLF)
The spread of COVID-19 and the efforts to contain it have affected much of the nation’s economy, disrupting the operations of many small businesses. One measure taken by the Federal Reserve to help provide relief is the establishment of the Paycheck Protection Program Facility (PPPLF), aimed at supplying liquidity to financial institutions participating in the Small Business Administration’s Paycheck Protection Program. The authors provide background on the PPPLF and discuss its intended effects.
By Haoyang Liu and Desi Volker
The Effect of the Central Bank Liquidity Support during Pandemics: Evidence from the 1918 Influenza Pandemic
The coronavirus outbreak raises the question of how central bank liquidity support affects financial stability and promotes economic recovery. Using newly assembled data on cross-county flu mortality rates and the balance sheets of state-chartered banks in New York, the authors investigate the effects of the 1918 influenza pandemic on the banking system and the role of the Federal Reserve during the pandemic.
Haelim Anderson, Jin-Wook Chang, and Adam Copeland, Staff Report 928, May 2020
Risk Preferences at the Time of COVID-19: An Experiment with Professional Traders and Students
The authors study whether the COVID-19 pandemic has had an impact on risk preferences. They find that the shock to social and economic life due to the pandemic has not significantly affected risk preferences, both for a sample of professional traders and for one of students. They note that the stability of risk preferences after arguably the biggest shock to developed economies since World War II suggests that preferences for risk are a stable characteristic of individual behavior.
Marco Angrisani, Marco Cipriani, Antonio Guarino, Ryan Kendall, and Julen Ortiz de Zarate Pina, Staff Report 927, May 2020
The Spread of COVID-19 and the BCG Vaccine: A Natural Experiment in Reunified Germany
As COVID-19 has spread across the globe, several observers have noticed that countries still administering an old vaccine against tuberculosis—the BCG vaccine—have had fewer COVID 19 cases and deaths per capita in the early stages of the outbreak. This paper uses a geographic regression discontinuity analysis to study whether and how COVID-19 prevalence changes discontinuously at the old border between West Germany and East Germany, two countries with very different vaccination policies during the Cold War era.
Richard Bluhm and Maxim Pinkovskiy, Staff Report 926, May 2020
Disasters Everywhere: The Costs of Business Cycles Reconsidered
The world’s economies are experiencing one of the largest and most sudden declines due to the coronavirus pandemic. The authors argue that such extreme and costly events are not the only reason for stabilization policy. Consumers experience considerable welfare losses from peacetime recessions, only some of which are associated with financial crises. Substantial gains in welfare can be made from better stabilization policies. More than ever, the authors conclude, depression prevention and stabilization policies are central to the discipline of macroeconomics.
Òscar Jordà, Moritz Schularick, and Alan M. Taylor, Staff Report 925, May 2020
Modigliani Meets Minsky: Inequality, Debt, and Financial Fragility in America, 1950-2016
The authors exploit a new household-level data set that covers the joint distributions of debt, income, and wealth to study the increase in U.S. household debt and its relation to growing income inequality and financial fragility. Among their findings: Home equity borrowing accounts for about half of the increase in U.S. household debt in the past four decades. The resulting debt increase made balance sheets more sensitive to income and house price fluctuations and turned the American middle class into the epicenter of growing financial fragility.
Alina K. Bartscher, Moritz Kuhn, Moritz Schularick, and Ulrike I. Steins, Staff Report 924, May 2020
The Effect of Bank Monitoring on Loan Repayment
Bank monitoring consists of all bank activities aimed at verifying and improving the likelihood that borrowers comply with their loan obligations. Using granular loan-level information from the Italian Credit Register, the authors build a novel measure of bank monitoring based on banks’ requests for information on their existing borrowers and investigate the effect of bank monitoring on loan repayment. They find that bank monitoring substantially reduces the probability of a delinquency.
Nicola Branzoli and Fulvia Fringuellotti, Staff Report 923, May 2020
The Myth of the Lead Arranger’s Share
The authors use data from the Shared National Credit Program to examine the role of the lead arranger’s stake in a syndicated loan. They find that the lead arranger sells its entire share in about 12 percent of all the loans it helps syndicate and that such loans are less likely to become non-performing. Their result is robust to several different measures of loan performance and is reflected in subsequent secondary market prices. The authors explore syndicated loan underwriting risk as an alternative theory that may help explain this result.
Kristian Blickle, Quirin Fleckenstein, Sebastian Hillenbrand, and Anthony Saunders, Staff Report 922, May 2020
Pandemics Change Cities: Municipal Spending and Voter Extremism in Germany, 1918-1933
The outbreak of COVID-19 has renewed age-old questions about the economic and social effects of pandemics. The author contributes to this discussion by analyzing how the influenza outbreak of 1918 20 affected cities in the years after the pandemic. In particular, the analysis examines city spending on amenities as well as voting for extremist parties in Germany between 1925 and 1933.
Kristian Blickle, Staff Report 921, May 2020