Stimulation, Savings, and Inflation: Top Five Articles on Liberty Street’s Economy in 2021
New York Fed researchers covered a wide range of topics on Economy of the rue de la Liberté (LSE) over the past year, the multiple effects of the pandemic – on supply chains, the banking system and inequality, for example – remain a major area of focus. Judging from the list below, LSE readers were particularly interested in understanding the rest: the most viewed articles of the year analyze household use of stimulus payments, the implications of foreclosure period savings, the risk of a new bubble real estate, the compression of the breakeven point of the inflation curve, and the potential roles central banks could play in the digital currency sphere. As the year draws to a close, look back at the top five posts of 2021.
After reporting evidence on how households used their first economic impact payments (first issued in mid-April 2020), the authors examine how households allocated funds for the second round of checks stimulus packages (first issued at the end of December 2020) and study how they plan to use the third round (authorized in March 2021). They find a remarkably stable trend over the three rounds of stimulus payments: an average marginal propensity to consume of around 26%, with most funds going to savings and debt repayment. (April 7)
By Olivier Armantier, Leo Goldman, Gizem Koşar and Wilbert van der Klaauw
How the US economy emerges from the COVID-19 pandemic depends in part on what happens to the trillions of dollars in “excess savings” that US households have accumulated since March 2020. The authors argue that these savings are not that excessive when viewed against in the context of the unprecedented government interventions adopted in the previous year in favor of households. Moreover, they argue that these savings are unlikely to generate a destabilizing increase in demand after the pandemic. (April 5)
By Florin Bilbiie, Gauti Eggertsson, Giorgio Primiceri and Andrea Tambalotti
During the pandemic, house prices rose even faster than in the run-up to the 2007 financial crisis, sparking fears that another dangerous real estate bubble could develop. The authors take a closer look at soaring house prices; their geographic distribution of data indicates that we are not witnessing a simple repetition of the early 2000s. (September 8)
See also the follow-up post: “If prices fall, mortgage foreclosures will rise. “
By Andrew Haughwout and Belicia Rodriguez
Breakeven inflation – the difference in yield between a nominal Treasury security and an inflation-protected Treasury security of the same maturity – is closely watched by market participants and policymakers. By examining the dynamics of breakeven inflation points, the authors show a substantial downward change in level as well as a marked flattening of the breakeven inflation curve. This pattern has been evident for several years and persisted during the pandemic. (March 22)
By Richard K. Crump, Nikolay Gospodinov and Desi Volker
Recent developments in payments technology raise important questions about the role of central banks in the digital currency sphere. The authors examine two ways a central bank might choose to get involved with digital currencies – by supporting stablecoins or by issuing their own digital currencies – and discuss some implications of these potential choices. (June 23)
By Tobias Adrian, Michael Lee, Tommaso Mancini-Griffoli and Antoine Martin
How to cite:
“Stimulus, savings and inflation: the top five Economy of the rue de la Liberté 2021 Posts, ”Federal Reserve Bank of New York Economy of the rue de la Liberté, December 22, 2021, https://libertystreeteconomics.newyorkfed.org/2021/12/stimulus-savings-and-inflation-the-top-five-liberty-street-economics-posts-of-2021.html.
The opinions expressed in this article are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any error or omission is the responsibility of the author (s).