ECONOMY
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Learning by Bouncing: Overdraft Experience and Salience
Donald P. Morgan and Wilbert van der Klaauw Overdraft credit, when banks and credit unions allow customers to spend more than their checking account holds, has many critics. One fundamental concern is whether overdrafts are salient—whether account holders know how often they overdraw and how much it costs them. To shed light on this question, we asked participants in the…
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Deposits and the March 2023 Banking Crisis—A Retrospective
Stephan Luck and Matthew Plosser In this post, we evaluate how deposits have evolved over the latter portion of the current monetary policy tightening cycle. We find that while deposit betas have continued to rise, they did not accelerate following the bank runs in March 2023. In addition, while overall deposit funding has remained stable, we find that the banks…
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What Happens to U.S. Activity and Inflation if China’s Property Sector Leads to a Crisis?
Ozge Akinci, Hunter Clark, Jeff Dawson, Matthew Higgins, Silvia Miranda-Agrippino, Ethan Nourbash, and Ramya Nallamotu A previous post explored the potential implications for U.S. growth and inflation of a manufacturing-led boom in China. This post considers spillovers to the U.S. from a downside scenario, one in which China’s ongoing property sector slump takes another leg down and precipitates an economic…
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The New York Fed DSGE Model Forecast—March 2024
Marco Del Negro, Pranay Gundam, Donggyu Lee, Ramya Nallamotu, and Brian Pacula 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 December 2023. As usual, we wish to remind our readers that the DSGE model forecast…
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Global Supply Chains and U.S. Import Price Inflation
Mary Amiti, Oleg Itskhoki, and David E. Weinstein Inflation around the world increased dramatically with the reopening of economies following COVID-19. After reaching a peak of 11 percent in the second quarter of 2021, world trade prices dropped by more than five percentage points by the middle of 2023. U.S. import prices followed a similar pattern, albeit with a lower…
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Will the Moderation in Wage Growth Continue?
Martin Almuzara, Richard Audoly, Augustin Belin, and Davide Melcangi Wage growth has moderated notably following its post-pandemic surge, but it remains strong compared to the wage growth prevailing during the low-inflation pre-COVID years. Will the moderation continue, or will it stall? And what does it say about the current state of the labor market? In this post, we use our…
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Stablecoins and Crypto Shocks – Liberty Street Economics
Kenechukwu Anadu, Pablo D. Azar, Marco Cipriani, Thomas Eisenbach, Catherine Huang, Mattia Landoni, Gabriele La Spada, Marco Macchiavelli, Antoine Malfroy-Camine, and J. Christina Wang In a previous post, we described the rapid growth of the stablecoin market over the past few years and then discussed the TerraUSD stablecoin run of May 2022. The TerraUSD run, however, is not the only…
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Expectations and the Final Mile of Disinflation
Richard K. Crump, Stefano Eusepi, and Ayşegül Şahin In the aftermath of the COVID-19 pandemic, the U.S. economy experienced a swift recovery accompanied by a sharp rise in inflation. Inflation has been gradually declining since 2022 without a notable slowdown in the labor market. Nonetheless, inflation remains above the Federal Reserve’s 2 percent target and the path of the so-called…
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Can Electric Cars Power China’s Growth?
Thomas Klitgaard China’s aggressive policies to develop its battery-powered electric vehicle (BEV) industry have been successful in making the country the dominant producer of these vehicles worldwide. Going forward, BEVs will likely claim a growing share of global motor vehicle sales, helped along by subsides and mandates implemented in the United States, Europe, and elsewhere. Nevertheless, China’s success in selling…
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Businesses See Inflationary Pressures Moderating
Jaison R. Abel and Richard Deitz Shortly after the recovery from the pandemic recession began, the U.S. economy entered a period of high inflation as surging demand, severe supply disruptions, and worker shortages combined to create large imbalances and inflationary pressures in the economy. More recently, however, inflationary pressures have been moderating. Indeed, the inflation rate as measured by the…
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