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Cash Assets of Foreign Banks: An Example of Seasonal Adjustment Gone Awry

Author

Listed:
  • Adam Copeland
  • Todd Keister
  • Parinitha Sastry

Abstract

Federal Reserve Statistical Release H.8 provides aggregate data on the assets and liabilities of commercial banks in the United States. Two types of data are provided: one in which each series is adjusted to offset regular, seasonal movements, and another in which no adjustment is made. Recently, a striking pattern has emerged in one particular data series: the cash assets of foreign-related banking institutions.[1] In the seasonally adjusted data, this value has fallen 36 percent since its peak in June 2011?a sharp movement that has generated concern among market observers. The nonseasonally adjusted data present a different picture, however, with a decline of only 16 percent over this period. Which of these numbers more accurately represents recent events? In this post, we argue that the seasonally adjusted data are misleading in this case and should not be used. More generally, we use this episode to highlight the need for caution when using and interpreting seasonally adjusted data.

Suggested Citation

  • Adam Copeland & Todd Keister & Parinitha Sastry, 2012. "Cash Assets of Foreign Banks: An Example of Seasonal Adjustment Gone Awry," Liberty Street Economics 20120109, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednls:86783
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    More about this item

    Keywords

    cash assets; seasonal adjustment; foreign banks;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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