G28 - Government Policy and Regulation
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Estimating the Appropriate Quantity of Settlement Balances in a Floor System
This paper presents two complementary approaches to estimating the appropriate quantity of settlement balances needed to effectively operate monetary policy under a floor system in Canada. -
Three things we learned about the Lynx payment system
Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently. -
From LVTS to Lynx: Quantitative Assessment of Payment System Transition
We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays. -
Exporting and Investment Under Credit Constraints
We examine the relationship between firms’ performance and credit constraints affecting export market entry. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets. -
Mandatory Retention Rules and Bank Risk
This paper studies, theoretically and empirically, the unintended consequences of mandatory retention rules in securitization. It proposes a novel model showing that while retention strengthens monitoring, it may also encourage banks to shift risk.