Tweets by @NYFedResearch

Economic Research

Liberty Street Economics
Global Trends in Interest Rates
Long-term government bond yields are at their lowest levels of the past 150 years in advanced economies. Our bloggers argue that this low-interest-rate environment reflects secular global forces that have lowered real interest rates by about two percentage points over the past forty years. The key factors behind this development are an increase in demand for safety and liquidity among investors and a slowdown in global economic growth.
By Marco Del Negro, Domenico Giannone, Marc P. Giannoni, Andrea Tambalotti, Brandyn Bok, and Eric Qian
What Can We Learn from the Timing of Interbank Payments?
The Federal Reserve vastly increased the size of its balance sheet from 2008 to 2014. The resulting abundance of reserves led to a change in the intraday timing of interbank payments. Our bloggers find that as the Federal Reserve drains reserves as part of its balance sheet normalization program, tracking the timing of payments sent by banks could provide an informative signal about the impact of the shrinking Federal Reserve balance sheet on the payments system.
By Adam Copeland, Linsey Molloy, and Anya Tarascina
Stressed Outflows and the Supply of Central Bank Reserves
The world’s largest banks hold substantial liquidity buffers, made up of both securities and central bank reserves, to satisfy internal liquidity stress tests and minimum quantitative regulatory requirements. The appropriate level of liquidity buffers depends on the likely outflows in a market stress situation. In this post, our bloggers use public data to provide a rough estimate of stressed outflows that the largest banks would face and consider how they could meet these outflows.
By Ryan Bush, Adam Kirk, Antoine Martin, Phil Weed, and Patricia Zobel
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
Recent Publications
On Binscatter
This paper presents the first foundational study of binscatter—a very popular methodology for approximating the conditional expectation function in applied microeconomics. The authors provide several theoretical and practical results, which aid both in understanding the validity, or the lack thereof, of current practices, and in offering principled guidance for future applications. Their results are illustrated with simulated and real data throughout. Companion general-purpose software packages for Stata and R are provided.
Matias D. Cattaneo, Richard K. Crump, Max H. Farrell, and Yingjie Feng, Staff Report 881, February 2019
Complexity in Large U.S. Banks
In the system established to address global systemically important banks, complexity is considered to be a combination of balance sheet and derivatives exposures and the number of distinct legal entities within a bank holding company (BHC). Using a new data set of BHC structures over time, the authors introduce and compare various measures capturing the organizational, business, and geographic complexity of BHCs before and after the financial crisis.
Linda Goldberg and April Meehl, Staff Report 880, February 2019
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.