ECONOMY
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Are Financial Markets Good Predictors of R-Star?
Sophia Cho and John C. Williams Recently, there has been renewed attention on the natural rate of interest—often referred to as “r-star”—and whether it has risen from the historically low levels that prevailed before the COVID-19 pandemic. The natural interest rate is the real (inflation-adjusted) interest rate expected to prevail when supply and demand in the economy are in balance…
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Who Is Still on First? An Update of Characteristics of First-Time Homebuyers
Donghoon Lee and Joseph Tracy Following the COVID-19 health crisis, home prices and mortgage rates rose sharply. This created concerns that first-time homebuyers (FTBs) would be disadvantaged and would lose ground. Earlier this year, we documented that the share of purchase mortgages by FTBs, as well as their share of home purchases, have actually increased slightly over the past couple…
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How Firms Spread Good Management
Nicholas Bloom, Jonathan Hartley, Raffaella Sadun, Rachel Schuh, and John Van Reenen What is good management, and how is it transmitted across firms and plants? In a recent paper, we use survey and administrative data, coupled with a structural model of management, to explore these questions. We show that well-managed manufacturing firms—that is, firms that adopt more structured management practices…
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Who Is Still on First? An Update of Characteristics of First-Time Homebuyers
Donghoon Lee and Joseph Tracy Following the COVID-19 health crisis, home prices and mortgage rates rose sharply. This created concerns that first-time homebuyers (FTBs) would be disadvantaged and would lose ground. Earlier this year, we documented that the share of purchase mortgages by FTBs, as well as their share of home purchases, have actually increased slightly over the past couple…
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Flood Risk and Flood Insurance
Kristian S. Blickle, Evan Perry, and João A.C. Santos Recent natural disasters have renewed concerns about insurance markets for natural disaster relief. In January 2025, wildfires wreaked havoc in residential areas outside of Los Angeles. Direct damage estimates for the Los Angeles wildfires range from $76 billion to $131 billion, with only up to $45 billion of insured losses (Li and Yu,…
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A Check-In on the Mortgage Market
Andrew F. Haughwout, Donghoon Lee, Jonathan Lee, Joelle Scally, and Wilbert van der Klaauw Debt balances continued to march upward in the second quarter of 2025, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Mortgage balances in particular saw an increase of $131 billion. Following a steep rise…
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The Zero Lower Bound Remains a Medium-Term Risk
Sophia Cho, Thomas M. Mertens, and John C. Williams Interest rates have fluctuated significantly over time. After a period of high inflation in the late 1970s and early 1980s, interest rates entered a decline that lasted for nearly four decades. The federal funds rate—the primary tool for monetary policy in the United States—followed this trend, while also varying with cycles…
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How Shadow Banking Reshapes the Optimal Mix of Regulation
Kinda Hachem Decisions that are privately optimal often impose externalities on other agents, giving rise to regulations aimed at implementing socially optimal outcomes. In the banking industry, regulations are particularly heavy, plausibly reflecting a view by regulators that the relevant externalities could culminate in financial crises and destabilize the broader economy. Over time, the toolkit for regulating banks and bank-like…
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Who Lends to Households and Firms?
Nina Boyarchenko and Leonardo Elias The financial sector in the U.S. economy is deeply interconnected. In our previous post, we showed that incorporating information about this network of financial claims leads to a substantial reassessment of which financial sectors are ultimately financing the lending to the real sector as a whole (households plus nonfinancial firms). In this post, we delve…
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The Rise in Deposit Flightiness and Its Implications for Financial Stability
Kristian Blickle, Jian Li, Xu Lu, and Yiming Ma Deposits are often perceived as a stable funding source for banks. However, the risk of deposits rapidly leaving banks—known as deposit flightiness—has come under increased scrutiny following the failures of Silicon Valley Bank and other regional banks in March 2023. In a new paper, we show that deposit flightiness is not…
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