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Economic Research

Recent Publications
Credit Spreads, Financial Crises, and Macroprudential Policy
The authors have developed a model with banks that face occasionally binding leverage constraints, and in which bank’s equity interest is endogenous. In the model, they find that macroprudential policy designed to enhance the incentive for banks to issue equity lowers the probability of a financial crisis and increases welfare.
By Ozge Akinci and Albert Queralto, Staff Reports 802, November 2016
Cross-Border Prudential Policy Spillovers: How Much? How Important?
In a multi-study initiative of the International Banking Research Network (IBRN), researchers from fifteen central banks and two international organizations use micro-banking data—in conjunction with a novel data set of prudential instruments—to study international spillovers of prudential policy changes for bank lending growth.
By Claudia M. Buch and Linda Goldberg, Staff Reports 801, November 2016
An Overview of the Survey of Consumer Expectations
Consumer expectations about economic outcomes are increasingly useful inputs into forecasting models. The authors present an overview of the New York Fed’s Survey of Consumer Expectations, which collects timely information on a wide variety of household expectations regarding inflation, the labor market, and U.S. economic conditions overall.
By Olivier Armantier, Giorgio Topa, Wilbert van der Klaauw, and Basit Zafar, Staff Reports 800, November 2016
Intraday Market Making with Overnight Inventory Costs
The authors present a model of a market-making high-frequency trading firm that aims to maximize end-of-day profits, but has the additional goal of unwinding its positions before markets close. They find that the rise in price impact due to the end-of-day constraint leads to more volatile price paths intraday.
By Tobias Adrian, Agostino Capponi, Erik Vogt, and Hongzhong Zhang, Staff Reports 799, October 2016
Home Price Expectations and Behavior: Evidence from a Randomized Information Experiment
Household expectations about future home price growth are believed to play an important role in housing market dynamics. In this paper, the authors find that consumers’ home price expectations react to information about past local home price growth in a way that is not fully consistent with actual patterns in home prices.
By Luis Armona, Andreas Fuster, and Basit Zafar, Staff Reports 798, October 2016
Auto Credit and the 2005 Bankruptcy Reform: The Impact of Eliminating Cramdowns
The authors find that the elimination of auto loan cramdowns in Chapter 13 bankruptcy—the ability of borrowers to reduce the principal on their loans to the market value of the car—resulted in a significant decline in auto loan interest rates. They also find some evidence that eliminating cramdowns increased the size of auto loans.
By Rajashri Chakrabarti and Nathaniel Pattison, Staff Reports 797, October 2016
Market Liquidity after the Financial Crisis
The authors examine the broad trading environment in an effort to outline potential causes of market liquidity trends since the 2007-09 financial crisis—including changing regulations as well as plausible alternative drivers. They do not find strong quantitative evidence of a significant decline in bond market liquidity in the years after the crisis.
By Tobias Adrian, Michael Fleming, and Erik Vogt, Staff Reports 796, October 2016
Bad Credit, No Problem? Credit and Labor Market Consequences of Bad Credit Reports
The authors study the effects of credit reports on credit and labor market outcomes, such as lending and hiring decisions. Their findings show that credit reports are important for credit market outcomes but are of limited consequence for labor market outcomes, because employers rely on a much broader set of screening mechanisms.
By Will Dobbie, Paul Goldsmith-Pinkham, Neale Mahoney, and Jae Song, Staff Reports 795, September 2016