The Trade War in Numbers
We build upon new developments in the international trade literature to isolate and quantify the long-run economic impacts of tariff changes on the United States and the global economy.
Staff working papers
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The Propagation of Regional Shocks in Housing Markets: Evidence from Oil Price Shocks in Canada
How do global oil price shocks spread through Canada’s economy? With Canada’s regionally diverse economy in mind, we explore the implications of oil price shocks for Canadian housing markets and regional economies. We show that the belief that oil price shocks only matter in oil-rich regions is false. -
Macroprudential FX Regulations: Shifting the Snowbanks of FX Vulnerability?
Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions. -
Calibrating the Magnitude of the Countercyclical Capital Buffer Using Market-Based Stress Tests
How much capital do banks need as a buffer to absorb severe shocks? By using historical stock market data, market-based stress tests help estimate the magnitude of capital buffers necessary to absorb severe but plausible shocks. -
Non-Performing Loans, Fiscal Costs and Credit Expansion in China
This paper studies how the credit expansion policy pursued by the Chinese government in an effort to stimulate its economy in the post-crisis period affects bank–firm loan contracts and the macroeconomy. We build a structural model with financial frictions in which the optimal loan contract reflects the trade-off between leverage and the probability of default. -
Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts
We present a novel database of real-time data and forecasts from the Bank of Canada’s staff economic projections. We then provide a forecast evaluation for GDP growth and CPI inflation since 1982: we compare the staff forecasts with those from commonly used time-series models estimated with real-time data and with forecasts from other professional forecasters and provide standard bias tests. -
Multibank Holding Companies and Bank Stability
This paper studies the relationship between bank holding company affiliation and the individual and systemic risk of banks. Using the 2005 hurricane season in the US as an exogenous shock to bank balance sheets, we show that banks that are part of a holding parent company are more resilient than independent banks. -
Monetary Policy Uncertainty: A Tale of Two Tails
We document a strong asymmetry in the evolution of federal funds rate expectations and map this observed asymmetry into measures of monetary policy uncertainty. We show that periods of monetary policy tightening and easing are distinctly related to downside (policy rate is higher than expected) and upside (policy rate is lower than expected) uncertainty. -
Financial Development Beyond the Formal Financial Market
This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries. -
Should Bank Capital Regulation Be Risk Sensitive?
We present a simple model to study the risk sensitivity of capital regulation. A banker funds investment with uninsured deposits and costly capital, where capital resolves a moral hazard problem in the banker’s choice of risk.