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Liberty Street Economics
Just Released: The New York Fed Staff Forecast—April 2018
At the spring meeting of its Economic Advisory Panel, the Federal Reserve Bank of New York presents its forecast for real GDP growth, the unemployment rate, and inflation in 2018 and 2019. In this post, our bloggers share a summary of the newly released forecast.
By Jonathan McCarthy, Richard Peach, and Robert Rich
Just Released: Is Housing a Good Investment? Where You Stand Depends on Where You Sit

Home price growth expectations remained stable relative to last year, according to the newly released 2018 SCE Housing Survey from the Federal Reserve Bank of New York. Although the majority of households continue to view housing as a good financial investment, there are some persistent and large regional differences across the country.

By Andreas Fuster, Andrew Haughwout, Nima Dahir, and Michael Neubauer
How Will the New Tax Law Affect Homeowners in High Tax States? It Depends
Several provisions of the Tax Cuts and Jobs Act of 2017 are particularly significant for homeowners. Our bloggers compare the federal tax liability, and the marginal after-tax cost of mortgage interest and property taxes, under the old and new tax codes for a wide range of hypothetical recent home buyers in a high tax state. They find that impacts vary substantially along the income/home price distribution.
By Richard W. Peach, Gizem Kosar, and Nicole Gorton
Vulnerable Growth
Our bloggers review some of the findings of their recent paper in which they propose a method for constructing the full conditional distribution of GDP projected growth as a function of current economic and financial conditions. One key finding: Unusually tight financial conditions yield valuable information about the downside risk to GDP growth.
By Tobias Adrian, Nina Boyarchenko, and Domenico Giannone
Do the Employed Get Better Job Offers?
Job seeking is pervasive among employed workers. But how do the job offers received by employed workers compare with those received by the unemployed? Our bloggers shed some light on how job offers may vary by using novel data from a job search supplement to the New York Fed’s Survey of Consumer Expectations.
By R. Jason Faberman, Thomas Haasl, Andreas I. Mueller, Aysegül Sahin, and Giorgio Topa
Recent Publications
Economic Predictions with Big Data: The Illusion of Sparsity
The authors study a variety of predictive problems in macroeconomics, microeconomics, and finance. Their main finding is that economic data do not appear informative enough to uniquely identify the relevant predictors when a large pool of variables is available to the researcher. They argue that therefore the correct approach to scientific reporting is to assess and fully convey this uncertainty, rather than understating it through the use of prior assumptions favoring low-dimensional models.
By Domenico Giannone, Michele Lenza, and Giorgio E. Primiceri, Staff Reports 847, April 2018
Can Low-Wage Workers Find Better Jobs?
The authors examine the extent to which low-wage workers in the United States transition to better jobs and explore the factors associated with such a move up the job ladder. Using data covering the economic expansion following the Great Recession (2011-17), they find that around 70 percent of low-wage workers stayed in the same job.
By Todd Gabe, Jaison R. Abel, and Richard Florida, Staff Reports 846, April 2018
The Political Origins of Section 13(3) of the Federal Reserve Act
At the height of the financial crisis in 2008, the Federal Reserve used its Section 13(3) authority to provide loans to nonbank financial institutions. This article explores the political and legislative origins of the section, focusing on why Congress chose to endow the central bank with such an authority.
By Parinitha Sastry, Economic Policy Review, Forthcoming
The International Transmission of Monetary Policy
This paper presents the novel results from a multi-nation project by the International Banking Research Network (IBRN) on the cross-border transmission of conventional and unconventional monetary policy through banks. The authors find that international spillovers into lending to the private sector do occur, especially for U.S. policies, and that bank-specific heterogeneity influences the magnitudes of transmission.
By Claudia M. Buch, Matthieu Bussière, Linda Goldberg, and Robert Hills, Staff Reports 845, March 2018
DSGE Forecasts of the Lost Recovery
The authors document the accuracy of the projections of the New York Fed Dynamic Stochastic General Equilibrium (DSGE) model during the recovery from the financial crisis. They find the model's forecasting accuracy to be comparable to that of private forecasters, and notably better for output growth than the median forecasts from the FOMC's Summary of Economic Projections.
By Michael Cai, Marco Del Negro, Marc P. Giannoni, Abhi Gupta, Pearl Li, and Erica Moszkowski, Staff Reports 844, March 2018
What Would You Do with $500? Spending Responses to Gains, Losses, News, and Loans
The authors use survey evidence on reported spending in various scenarios to generate guidance that is useful for testing and refining existing models of consumption. Their survey yielded six broad conclusions—including the finding that spending responses to losses are much larger and more widespread than responses to gains of the same magnitude.
By Andreas Fuster, Greg Kaplan, and Basit Zafar, Staff Reports 843, March 2018
The Side Effects of Safe Asset Creation
Higher government debt satisfies the demand for safe assets, raising the natural rate of interest and restoring full employment. Even if governments can address a shortage of safe assets by increasing debt, however, it remains unclear whether they should do so. The authors present an incomplete markets model to understand the costs and benefits of increasing government debt in a low interest rate environment.
By Sushant Acharya and Keshav Dogra, Staff Reports 842, March 2018