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The Federal Reserve Bank of New York was incorporated in May 1914 and opened for business in November later that year. To commemorate the New York Fed’s centennial, take a look at the people and events that helped shape our history.

Articles by NY Fed

At the New York Fed: Fifth Annual Conference on the U.S. Treasury Market

3 days ago

Michael J. Fleming, Peter Johansson, Frank M. Keane, and Justin Meyer

The New York Fed recently hosted the fifth annual Conference on the U.S. Treasury Market. The one-day event was co-sponsored with the U.S. Department of the Treasury, the Federal Reserve Board, the U.S. Securities and Exchange Commission (SEC), and the U.S. Commodity Futures Trading Commission (CFTC). This year’s agenda featured a series of keynote addresses and expert panels focused on a variety of topics, including issues related to the LIBOR transition, data transparency and reporting requirements, and market structure and risk.

New York Fed President John Williams began the day’s discussions with introductory remarks, focusing primarily on the needed transition away from using LIBOR rates in

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Trade Policy Uncertainty May Affect the Organization of Firms’ Supply Chains

5 days ago

Sebastian Heise, Justin R. Pierce, Georg Schaur, and Peter K. Schott

Global trade policy uncertainty has increased significantly, largely because of a changing tariff regime between the United States and China. In this blog post, we argue that trade policy can have a significant effect on firms’ organization of supply chains. When the probability of a trade war rises, firms become less likely to form long-term, just-in-time relationships with foreign suppliers, which may lead to higher costs and welfare losses for consumers. Our research shows that even in the absence of actual tariff changes, an increased likelihood of a trade war can significantly distort U.S. imports.

In a recent study, we examine how firms set up and operate their international supply chains, building on a

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Since the Financial Crisis, Aggregate Payments Have Co-moved with Aggregate Reserves. Why?

7 days ago

Thomas Eisenbach, Kyra Frye, and Helene Hall

Fedwire Funds, a key payment system in the United States, is used by banks to wire money to one another throughout the day. Historically, the total value of payments sent over Fedwire has been roughly proportional to economic activity. Since the financial crisis, however, we have instead observed a strong co-movement between total payments and the level of aggregate reserves. This co-movement suggests that a fraction of every dollar of reserves created recirculates on a daily basis. In this post, we investigate why total payments, a flow variable driven by real and financial activity, would co-move with total reserves, a stock variable controlled by the Federal Reserve.

The chart below illustrates the relationship between nominal

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Just Released: Introducing the SCE Public Policy Survey

25 days ago

Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw

Today, we are releasing new data on individuals’ expectations for future changes in a wide range of public policies. These data have been collected every four months since November 2015 as part of our Survey of Consumer Expectations (SCE). The goal of this post is to introduce the SCE Public Policy Survey and highlight some of its features.

Households cope with considerable uncertainty in forming plans and making decisions. This includes uncertainty about their personal situations as well as about their external environment. An important source of uncertainty arises from (often abrupt) changes in government policy, including changes in tax rates and in the benefit level of social programs. Tracking individuals’ subjective

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Optimists and Pessimists in the Housing Market

26 days ago

Haoyang Liu and Christopher Palmer

Given momentum in house prices over business cycles, research on consumer beliefs since the financial crisis has honed in on the potential importance of extrapolative beliefs—myopically assuming trends in asset prices will continue. Extrapolation is frequently cited as a central reason for excessively optimistic expectations about future asset prices, featuring prominently, for example, in the irrational exuberance narrative of Shiller. Other influential work since the Great Recession has emphasized the outsized role that extrapolative optimists can have in bubble formation. In this post, we look at how much dispersion there is in the amount of house price extrapolation and how consequential extrapolative beliefs could be for house price

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Does U.S. Health Inequality Reflect Income Inequality—or Something Else?

27 days ago

Maxim Pinkovskiy

Health is an integral part of well-being. The United Nations Human Development Index uses life expectancy (together with GDP per capita and literacy) as one of three key indicators of human welfare across the world. In this post, I discuss the state of life expectancy inequality in the United States and examine some of the underlying factors in its evolution over the past several decades.

I will describe evidence in the health literature that first, inequality in life expectancy in the United States is increasing, and second, that life expectancy has become increasingly correlated with income. However, I will also argue that the mechanism at work is more complicated than higher income pushing up life expectancy. In particular, I will cite evidence that

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From the Vault: A Look Back at the October 15, 2014, Flash Rally

27 days ago

Michael J. Fleming, Peter Johansson, Frank M. Keane, and Justin Meyer

Five years ago today, U.S. Treasury yields plunged and then quickly rebounded for no apparent reason amid high volatility, strained liquidity conditions, and record trading volume in the market. Federal Reserve Chair Jerome Powell, then a Board governor, noted that such episodes, “threaten to erode investor confidence” and that investors need “to have full faith in the structure and functioning of Treasury markets themselves.” The October 15, 2014, “flash rally” led to an interagency staff report on the events of that day, an annual series of Treasury market conferences, additional study of clearing and settlement practices, and the introduction of a new transactions reporting scheme. Many of these developments

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Is Free College the Solution to Student Debt Woes? Studying the Heterogeneous Impacts of Merit Aid Programs

October 10, 2019

Rajashri Chakrabarti, William Nober, and Wilbert van der Klaauw

The rising cost of a college education has become an important topic of discussion among both policymakers and practitioners. At least eleven states have recently introduced programs to make public two-year education tuition free, including New York, which is rolling out its Excelsior Scholarship to provide tuition-free four-year college education to low-income students across the SUNY and CUNY systems. Prior to these new initiatives,

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Who Borrows for College—and Who Repays?

October 9, 2019

Andrew F. Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Student loans are increasingly a focus of discourse among politicians, policymakers, and the news media, resulting in a range of new ideas to address the swelling aggregate debt. Evaluating student loan policy proposals requires understanding the challenges faced by student borrowers. In this post, we explore the substantial variation in the experiences of borrowers and consider the distributional effects of various policy options.

The spectacular growth in student loan debt has been due to an increase in both average balances and number of borrowers, defying the credit cycle through the Great Recession when balances on other types of debt contracted. Because a critical feature of the federal student

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Job Ladders and Careers

October 8, 2019

Fatih Karahan, Brendan Moore, and Serdar Ozkan

Workers in the United States experience vast differences in lifetime earnings. Individuals in the 90th percentile earn around seven times more than those in the 10th percentile, and those in the top percentile earn almost twenty times more. A large share of these differences arise over the course of people’s careers. What accounts for these vastly different outcomes in the labor market? Why do some individuals experience much steeper earnings profiles than others? Previous research has shown that the “job ladder”—in which workers obtain large pay increases when they switch to better jobs or when firms want to poach them—is important for wage growth. In this post, we investigate how job ladders differ across workers.

First, to

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Some Places Are Much More Unequal than Others

October 7, 2019

Jaison R. Abel and Richard Deitz

Economic inequality in the United States is much more pronounced in some parts of the country than others. In this post, we examine the geography of wage inequality, drawing on our recent Economic Policy Review article. We find that the most unequal places tend to be large urban areas with strong economies where wage growth has been particularly strong for those at the top of the wage distribution. The least unequal places, on the other hand, tend to have relatively sluggish economies that deliver slower wage growth for high, middle, and lower wage earners alike. Many of the least unequal places are concentrated in the Rust Belt. These differences in the degree of wage inequality are tied to powerful economic forces arising from technological change

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Introduction to Heterogeneity Series: Understanding Causes and Implications of Various Inequalities

October 7, 2019

Rajashri Chakrabarti and William Nober

Economic analysis is often geared toward understanding the average effects of a given policy or program. Likewise, economic policies frequently target the average person or firm. While averages are undoubtedly useful reference points for researchers and policymakers, they don’t tell the whole story: it is vital to understand how the effects of economic trends and government policies vary across geographic, demographic, and socioeconomic boundaries. It is also important to assess the underlying causes of the various inequalities we observe around us, whether they are related to income, health, or any other set of indicators. Starting today, we are running a series of six blog posts (apart from this introductory post), each of which focuses on

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U.S. Virgin Islands Struggle While Puerto Rico Rebounds

October 2, 2019

Jason Bram

Two years after hurricanes Irma and Maria wreaked havoc on Puerto Rico and the U.S. Virgin Islands, the two territories’ economies have moved in very different directions. When the hurricanes struck, both were already in long economic slumps and had significant fiscal problems. As of the summer of 2019, however, Puerto Rico’s economy was showing considerable signs of improvement since the hurricanes, while the Virgin Islands’ economy remained mired in a deep slump through the end of 2018, though signs of a nascent recovery have emerged in 2019. In this post, we assess the contrasting trends of these two economies since the hurricanes and attempt to explain the forces driving these trends.


To put the two territories’ post-hurricane economic and fiscal

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The New York Fed DSGE Model Forecast—September 2019

September 30, 2019

Ozge Akinci, William Chen, Marco Del Negro, Ethan Matlin, and Reca Sarfati

This post presents an update of the economic forecasts generated by the Federal Reserve Bank of New York’s dynamic stochastic general equilibrium (DSGE) model. We describe very briefly our forecast and its change since June 2019. As usual, we wish to remind our readers that the DSGE model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process. For more information about the model and variables discussed here, see our DSGE model Q & A.

The September model forecast for 2019-22 is summarized in the table below, alongside the June forecast, and in the following charts. The model uses quarterly macroeconomic data released through the second

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Minimum Wage Impacts along the New York-Pennsylvania Border

September 25, 2019

Jason Bram, Fatih Karahan, and Brendan Moore

The federal minimum wage, currently set at $7.25 per hour, has remained unchanged for the longest stretch of time since its 1938 inception under the Fair Labor Standards Act. With the real purchasing power of the federal minimum wage eroded by inflation, many states and municipalities have raised their local minimum wages. As of July 2019, fourteen states plus the District of Columbia—home to 35 percent of Americans—have minimum wages above $10 per hour, as do numerous localities scattered across other states. New York is among a handful of states—along with California, Connecticut, Illinois, Maryland, Massachusetts, and New Jersey—that has passed legislation to eventually increase minimum wages to $15 per hour. While New York began

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Just Released: Transitions to Unemployment Tick Up in Latest SCE Labor Market Survey

September 23, 2019

Gizem Kosar and Kyle Smith

The Federal Reserve Bank of New York’s July 2019 SCE Labor Market Survey shows a year-over-year rise in employer-to-employer transitions as well as an increase in transitions into unemployment. Satisfaction with promotion opportunities and wage compensation was largely unchanged, while satisfaction with non-wage benefits retreated. Regarding expectations, the average expected wage offer (conditional on receiving one) and the average reservation wage—the lowest wage at which respondents would be willing to accept a new job—both increased. Expectations regarding job transitions were largely stable.

The SCE Labor Market Survey, which has been fielded every four months since March 2014 as part of the broader Survey of Consumer Expectations (SCE),

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Once Upon a Time in the Banking Sector: Historical Insights into Banking Competition

September 23, 2019

Mark Carlson, Sergio Correia, and Stephan Luck

How does competition among banks affect credit growth and real economic growth? In addition, how does it affect financial stability? In this blog post, we derive insights into this important set of questions from novel data on the U.S. banking system during the nineteenth century.

The Effects of Banking Competition

According to Econ 101, an increase in competition should—under fairly general assumptions—lead to lower prices and greater output. Therefore, in the case of banking, increased competition should lower interest rates on loans and increase interest rates on deposits, resulting in more credit and deposit creation. However, banks are different than other, nonfinancial firms. For instance, banks specialize in obtaining

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The Transmission of Monetary Policy and the Sophistication of Money Market Fund Investors

September 4, 2019

Marco Cipriani, Jeff Gortmaker, and Gabriele La Spada

In December 2015, the Federal Reserve tightened monetary policy for the first time in almost ten years and, over the following three years, it raised interest rates eight more times, increasing the target range for the federal funds rate from 0-25 basis points (bps) to 225-250 bps. To what extent are changes in the fed funds rate transmitted to cash investors, and are there differences in the pass-through between retail and institutional investors? In this post, we describe the impact of recent rate increases on the yield paid by money market funds (MMFs) to their investors and show that the impact varies depending on investors’ sophistication.

The chart below shows the net yield (the yield that MMF investors receive, net of

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Online Estimation of DSGE Models

August 21, 2019

Michael Cai, Marco Del Negro, Edward Herbst, Ethan Matlin, Reca Sarfati, and Frank Schorfheide

The estimation of dynamic stochastic general equilibrium (DSGE) models is a computationally demanding task. As these models change to address new challenges (such as household and firm heterogeneity, the lower bound on nominal interest rates, and occasionally binding financial constraints), they become even more complex and difficult to estimate—so much so that current estimation procedures are no longer up to the task. This post discusses a new technique for estimating these models which belongs to the class of sequential Monte Carlo (SMC) algorithms, an approach we employ to estimate the New York Fed DSGE model. To learn more, check out this this paper of ours.

DSGE models are

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Are U.S. Tariffs Turning Vietnam into an Export Powerhouse?

August 14, 2019

Hunter Clark and Brendan Kelly

The imposition of Section 301 tariffs on about half of China’s exports to the United States has coincided with a fall in imports from China and gains for other countries. The U.S.-China trade conflict also appears to be accelerating an ongoing shift in foreign direct investment (FDI) from China to other emerging markets, particularly in Asia. Within the region, Vietnam is often cited as a clear beneficiary of these trends, a rising economy that could displace China, to some extent, in global supply chains. In this note, we examine the data and conclude that Vietnam is indeed gaining market share, but is too small to replace China anytime soon.

Which countries are picking up China’s market share?

The United States has levied three tranches

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Just Released: Mind the Gap in Delinquency Rates

August 13, 2019

Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw

Total household debt balances increased by $192 billion in the second quarter of 2019, boosted primarily by a $162 billion gain in mortgage installment balances, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data (the mortgage installment balances exclude home equity lines of credit, which are reported separately and have been declining in balance for some time). The new mortgage total of $9.4 trillion is slightly higher than the previous high in mortgage balances from the third quarter of 2008 in nominal terms.

The source for the Quarterly Report and this post is the New York Fed’s Consumer Credit Panel (CCP), a data set

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Does a Data Quirk Inflate China’s Travel Services Deficit?

August 7, 2019

Matthew Higgins, Thomas Klitgaard, and Anna Wong

Chinese residents are increasingly traveling to see the rest of the world, logging a total of 162 million foreign visits in 2018, up from 57 million in 2010. 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). According to other Chinese data, this understatement totaled $85 billion in 2018. If so, China’s deficit in travel services is smaller than officially reported, and its trade surplus correspondingly larger.

Trade and Travel

China’s merchandise

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At the New York Fed: Research Conference on FinTech

July 19, 2019

Alan Basmajian, Brad Groarke, Vanessa Kargenian, Kimberley Liao, Erika Ota-Liedtke, Jesse Maniff, and Asani Sarkar

Financial technology (“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, we summarize the principal themes and findings of the conference.

FinTech Advisory Group

In his opening remarks, Kevin Stiroh, head of the New York Fed’s Supervision Group, noted both the benefits and risks that FfinTtech poses to the economy of New York City and the surrounding region. Underscoring the need

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How Do Large Banks Manage Their Cash?

July 17, 2019

Jeffrey Levine and Asani Sarkar

Second of two posts

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. For example, the banks may continue to hold large amounts of excess reserves or shift to Treasury or agency securities or shrink their balance sheets. In this post, we provide new evidence on how large banks have managed their cash, which is the largest component of reserves, on a daily basis since the implementation of liquidity regulations.

What Determines a Large Bank’s Cash Holdings?

Banks primarily hold liquid securities to meet ongoing operational

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Large Bank Cash Balances and Liquidity Regulations

July 15, 2019

Jeffrey Levine and Asani Sarkar

Update (9 a.m.): An earlier version of this post transposed line labels in the first figure. The error has been corrected.

First of two posts

The Federal Open Market Committee (FOMC) has recently communicated its aim to continue implementing monetary policy in a regime that maintains an ample supply of reserves, though with a significantly lower level of reserves than has prevailed in recent years. 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, which we refer to as bank reserve demand. In this post, we discuss the recent evolution of large bank cash balances and the effect of liquidity regulations on these balances. In part two of

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Just Released: Historical Reconstruction of the New York Fed Staff Nowcast, 2002-15

July 12, 2019

Patrick Adams, Domenico Giannone, Eric Qian, and Argia Sbordone

The New York Fed Staff Nowcast has been running for over three years. Each Friday at 11:15 a.m., we publish our updated predictions for real GDP growth based on the data released each week. When the Bureau of Economic Analysis (BEA) releases the first estimate of GDP growth, we stop updating our nowcast and archive it. We maintain these archives as part of our Nowcasting Report on the New York Fed’s public website to allow users to study the features of the nowcast and its accuracy. Now, to better understand the model and its performance during different cyclical episodes, we are publishing extended historical archives of the nowcast. Doing so provides fourteen additional years of forecasts that can be used not

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Did the Value of a College Degree Decline during the Great Recession?

July 10, 2019

Rajashri Chakrabarti, Michelle Jiang, and William Nober

In an earlier post, we studied how educational attainment affects labor market outcomes and earnings inequality. In this post, we investigate whether these labor market effects were preserved across the last business cycle: Did students with certain types of educational attainment weather the recession better?

Focusing on students’ labor market outcomes during 2003-14 (a period that spans both a boom and a bust), we hope to answer the following questions:

Did certain majors yield better outcomes than others during the bust? Did graduation status matter more or less during the bust?
Did students from certain types of institutions weather the recession better?
Were disparities in earnings between majors exacerbated

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From Policy Rates to Market Rates—Untangling the U.S. Dollar Funding Market

July 8, 2019

Gara Afonso, Fabiola Ravazzolo, and Alessandro Zori

How do changes in the rate that the Federal Reserve pays on reserves held by depository institutions affect rates in money markets in which the Fed does not participate? Through which channels do changes in the so-called administered rates reach rates in onshore and offshore U.S. dollar money markets? In this post, we answer these questions with the help of an interactive map that guides us through the web of interconnected relationships between the Fed, key market players, and the various instruments in the U.S. dollar funding market, highlighting the linkages across the short-term financial products that form this market.

The Fed

In today’s monetary policy framework of ample reserves, the Fed sets two rates to steer

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How Large Are Default Spillovers in the U.S. Financial System?

June 26, 2019

Fernando Duarte, Collin Jones, and Francisco Ruela

Second of two posts

When a financial firm suffers sufficiently high losses, it might default on its counterparties, who may in turn become unable to pay their own creditors, and so on. This “domino” or “cascade” effect can quickly propagate through the financial system, creating undesirable spillovers and unnecessary defaults. In this post, we use the framework that we discussed in “Assessing Contagion Risk in a Financial Network,” the first part of this two-part series, to answer the question: How vulnerable is the U.S. financial system to default spillovers?

Detailed Network Data is Difficult to Obtain

The main challenge in estimating the expected value of default spillovers is that it requires knowledge of all the

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Just Released: New Regional Employment Data Now Available

June 24, 2019

Richard Deitz and Jonathan Hastings

Regional employment data provided by the U.S. Bureau of Labor Statistics (BLS) are a critically important tool used to track and assess local economic conditions on a timely basis. However, the primary data used for this purpose are monthly survey-based estimates that are revised once per year, and these revisions can sometimes be substantial and surprising. As a result, initial readings of these data can lead to conclusions about employment trends that may later change. It is possible to anticipate these revisions in advance of their release using a second publicly available data set released by the BLS. Like some of our colleagues at other Reserve Banks (the Dallas Fed and St. Louis Fed, in particular), the Federal Reserve Bank of New York is

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