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Economic Research

Liberty Street Economics
Mind the Gap in Delinquency Rates
The data source for the Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data is the New York Fed Consumer Credit Panel (CCP). The Bank began acquiring the CCP 2008, in part, to better understand consumer delinquency. This post analyzes two alternative measures of delinquency in the Quarterly Report and clarifies how they differ from delinquency rates typically reported by lenders.
By Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
Does a Data Quirk Inflate China’s Travel Services Deficit?
Increased travel spending by Chinese residents is acting to reduce the country's trade surplus because such spending is counted as a services import. However, there appears to be a quirk in the Chinese data that results in a significant understatement of the offsetting spending by visitors to China (a services export).  If so, China's deficit in travel services is smaller than officially reported, and its trade surplus correspondingly larger.
By Matthew Higgins, Thomas Klitgaard, and Anna Wong
At the New York Fed: Research Conference on FinTech
FinTech refers to the evolving intersection of financial services and technology. In March, the New York Fed hosted "The First New York Fed Research Conference on FinTech” to understand the implications of FinTech developments on issues that are relevant to the Fed’s mandates, such as lending, payments, and regulation. In this post, the authors review the principal themes and findings of the conference.
By Alan Basmajian, Brad Groarke, Vanessa Kargenian, Kimberley Liao, Erika Ota-Liedtke, Jesse Maniff, and Asani Sarkar
How Do Large Banks Manage Their Cash?
As the aggregate supply of reserves shrinks and large banks implement liquidity regulations, they may follow a variety of liquidity management strategies depending on their business models and the interest rate differences between alternative liquid instruments. In this post, the authors provide new evidence on how large banks have managed their cash—the largest component of reserves—on a daily basis since the implementation of liquidity regulations.
By Jeffrey Levine and Asani Sarkar
Large Bank Cash Balances and Liquidity Regulations
The liquidity needs of the largest U.S. commercial banks play an important role in understanding the banking system’s appetite for actual reserve holdings—bank reserve demand. In this post, the authors discuss the recent evolution of large bank cash balances, the effect of liquidity regulations on these balances, and how banks might react to changes in the supply of reserves.
By Jeffrey Levine and Asani Sarkar
Recent Publications
Firm-to-Firm Relationships and the Pass-Through of Shocks: Theory and Evidence
Using transaction-level U.S. import data, the author shows that a firm-to-firm relationship’s price becomes more responsive to exchange rate shocks both as the relationship ages and as it trades more intensively. To understand how old relationships differ from new ones, the author documents a set of stylized facts about the life cycle of a relationship. His findings suggest that aggregate mark-ups and the responsiveness of prices to shocks co-vary negatively with an economy’s relationship creation rate, which falls in recessions.
Sebastian Heise, Staff Report 896, August 2019
Corporate Credit Provision
Productive firms can access credit markets directly by issuing corporate bonds, or in an intermediated manner by borrowing through loans. The authors study the cyclical properties of corporate credit provision through these two types of debt instruments in major advanced economies. They argue that the cyclicality of corporate credit is intimately related to the cyclicality of the types of financial intermediaries active in the provision of credit.
Nina Boyarchenko and Philippe Mueller, Staff Report 895, August 2019
A Dynamic Theory of Collateral Quality and Long-Term Interventions
Although collateralization typically increases capital market liquidity, negative shocks to collateral quality may lead to sharp increases in borrowing costs and market breakdowns. This has motivated regulators to intervene in asset markets and lower policy rates to support lending activity. The authors develop a dynamic model where lending is subject to adverse selection and collateral quality is persistent but determined by hidden effort. Their framework offers a laboratory to study the dynamic effects of regulatory interventions.
Michael Junho Lee and Daniel Neuhann, Staff Report 894, August 2019
Online Estimation of DSGE Models
As the DSGE models used by central banks become more complex, improved algorithms for Bayesian computations are necessary. The authors provide a framework for performing parallel and online estimation of DSGE models using sequential Monte Carlo (SMC) techniques. Rather than starting from scratch each time a DSGE model has to be re-estimated, the SMC algorithm makes it possible to mutate and re-weight posterior draws from an earlier estimation so that they approximate a new posterior based on additional observations.
Michael Cai, Marco Del Negro, Edward Herbst, Ethan Matlin, Reca Sarfati, and Frank Schorfheide, Staff Report 893, August 2019
Who Sees the Trades? The Effect of Information on Liquidity in Inter-Dealer Markets
The authors focus on how differences in the availability of post-trade information from the market-making stage in the inter-dealer market impact overall market liquidity. They consider exogenous information disclosure policies first and then examine what might result from the strategic sale of post-trade information.
Rodney J. Garratt, Michael Junho Lee, Antoine Martin, and Robert M. Townsend, Staff Report 892, July 2019
Tying Down the Anchor: Monetary Policy Rules and the Lower Bound on Interest Rates
This paper uses a standard New Keynesian model to analyze the effects and implementation of various monetary policy frameworks in the presence of a low natural rate of interest and a lower bound on interest rates.
Thomas M. Mertens and John C. Williams, Staff Report 887, May 2019
Understanding the Evolution of Student Loan Balances and Repayment Behavior: Do Institution Type and Degree Matter?
To help inform the policy debate regarding student debt, the authors analyze the evolution of student loan balances and repayment behavior. They find that student loan growth and performance has varied across degrees, institutions, and time. Among their findings: Student loan balances at college exit for those pursuing undergraduate certificates and associate’s and post-bachelor’s degrees at private institutions increased sharply in the 2000-10 period relative to loans for corresponding degrees at public institutions.
Meta Brown, Rajashri Chakrabarti, Wilbert van der Klaauw, and Basit Zafar, Economic Policy Review, Forthcoming
Announcement-Specific Decompositions of Unconventional Monetary Policy Shocks and Their Macroeconomic Effects
The author proposes to identify monetary policy announcement–specific decompositions of asset price changes to identify monetary policy shocks without assuming time-invariance across announcements. To do so, he treats all asset price movements over the course of an announcement day as responses to a series of news shocks. In the period following a monetary policy announcement, these news shocks can be interpreted as monetary policy shocks. The author applies this approach to each scheduled FOMC announcement from 2007-18.
Daniel J. Lewis, Staff Report 891, June 2019