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Series:Liberty Street Economics  Bank:Federal Reserve Bank of New York 

Discussion Paper
Since the Financial Crisis, Aggregate Payments Have Co-moved with Aggregate Reserves. Why?
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.
AUTHORS: Eisenbach, Thomas M.; Frye, Kyra; Hall, Helene
DATE: 2019-11-04

Discussion Paper
Introducing the SCE Public Policy Survey
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 beliefs about future policy changes is important for understanding their behavior as consumers and workers. For example, knowing the extent to which tax changes and other shifts in public policy are anticipated is important for understanding their impacts on spending, work, and savings decisions. When fully anticipated, a change in a policy may generate little change in behavior at the point it is implemented, while showing more noticeable impacts when first discussed or announced. Indeed, our previous research has shown that the ultimate magnitude and timing of a policy change?s impact on economic outcomes will depend strongly on the degree to which it was anticipated.
AUTHORS: Van der Klaauw, Wilbert; Kyle Smith; Koşar, Gizem
DATE: 2019-10-17

Discussion Paper
Just Released: Press Briefing on the Evolution and Future of Homeownership
The New York Fed today held a press briefing on homeownership in the United States, in connection with its release of the 2019 Survey of Consumer Expectations Housing Survey. The briefing opened with remarks from New York Fed President John Williams, who provided commentary on the macroeconomic outlook and summarized the prospects for homeownership. He noted that the labor market remains very strong and that there seems to be little evidence of inflationary pressures, meaning that the economy is on a healthy growth path.
AUTHORS: Lee, Donghoon; Armantier, Olivier; Scally, Joelle; Haughwout, Andrew F.; Van der Klaauw, Wilbert; Koşar, Gizem
DATE: 2019-05-22

Discussion Paper
U.S. Virgin Islands Struggle while Puerto Rico Rebounds
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.
AUTHORS: Bram, Jason
DATE: 2019-10-02

Discussion Paper
Minimum Wage Impacts along the New York-Pennsylvania Border
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 raising its minimum wage from $7.25 per hour in 2014, neighboring Pennsylvania has left its minimum wage unchanged at the federal floor. Minimum-wage variation between contiguous states has allowed researchers to evaluate the respective impacts on employment and average earnings. In this post, we gauge the effect of New York?s recent minimum-wage hikes by comparing low-wage sectors in counties along the New York-Pennsylvania border.
AUTHORS: Brendan Moore; Bram, Jason; Karahan, Fatih
DATE: 2019-09-25

Discussion Paper
Once Upon a Time in the Banking Sector: Historical Insights into Banking Competition
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.
AUTHORS: Sergio Correia; Luck, Stephan
DATE: 2019-09-23

Discussion Paper
The Transmission of Monetary Policy and the Sophistication of Money Market Fund Investors
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.
AUTHORS: Cipriani, Marco; La Spada, Gabriele; Jeff Gortmaker
DATE: 2019-09-04

Discussion Paper
Mind the Gap in Delinquency Rates
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 $9.4trillion is slightly higher than the previous high in mortgage balances from the third quarter of 2008 in nominal terms.
AUTHORS: Lee, Donghoon; Scally, Joelle; Van der Klaauw, Wilbert; Haughwout, Andrew F.
DATE: 2019-08-13

Discussion Paper
Are U.S. Tariffs Turning Vietnam into an Export Powerhouse?
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 anytimesoon.
AUTHORS: Clark, Hunter L.; Kelly, Brendan
DATE: 2019-08-14

Discussion Paper
Who Pays the Tax on Imports from China?
Tariffs are a form of taxation. Indeed, before the 1920s, tariffs (or customs duties) were typically the largest source of funding for the U.S. government. Of little interest for decades, tariffs are again becoming relevant, given the substantial increase in the rates charged on imports from China. U.S. businesses and consumers are shielded from the higher tariffs to the extent that Chinese firms lower the dollar prices they charge. U.S. import price data, however, indicate that prices on goods from China have so far not fallen. As a result, U.S. wholesalers, retailers, manufacturers, and consumers are left paying the tax.
AUTHORS: Higgins, Matthew; Klitgaard, Thomas; Nattinger, Michael
DATE: 2019-11-25

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