D - Microeconomics
-
A Macroprudential Theory of Foreign Reserve Accumulation
This paper proposes a theory of foreign reserves as macroprudential policy. We study an open-economy model of financial crises in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. -
Amazon Effects in Canadian Online Retail Firm-Product-Level Data
I use firm-product-level data for Canadian online retailers to study how product scope (the average number of product categories per firm) evolved from 1999 to 2012. During this period, product scope dropped monotonically from 59 to 5 product categories. -
Home Equity Extraction and Household Spending in Canada
We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending. -
Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design
Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction. -
Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation
Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper. -
The Formation of House Price Expectations in Canada: Evidence from a Randomized Information Experiment
We conduct a randomized information experiment leveraging the Canadian Survey of Consumer Expectations. We provide causal evidence that respondents revise both their short and medium term expectations of future house price growth in a way that is consistent with observed short-term momentum in house prices. However, empirically, house price growth tends to revert to its mean in the medium term. -
Are Long-Horizon Expectations (De-)Stabilizing? Theory and Experiments
Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon. -
Online Privacy and Information Disclosure by Consumers
A consumer discloses information to a multi-product seller, which learns about the consumer’s preferences, sets prices, and makes product recommendations. While the consumer benefits from accurate product recommendations, the seller may use the information to price discriminate. -
Central Bank Communication That Works: Lessons from Lab Experiments
We use controlled laboratory experiments to test the causal effects of central bank communication on economic expectations and to distinguish the underlying mechanisms of those effects. In an experiment where subjects learn to forecast economic variables, we find that central bank communication has a stabilizing effect on individual and aggregate outcomes and that the size of the effect varies with the type of communication. -
Reassessing the Growth of HELOCs in Canada Using New Regulatory Data
Using new regulatory data on residential secured lending from Canadian banks, we assess the growth rate of home equity lines of credit (HELOCs).