Jason Allen is a Senior Research Officer in the Economic and Financial Research Department at the Bank of Canada. He is an applied microeconomist whose primary research interests center on the household sector and the role that competition in retail banking plays in shaping credit outcomes. Specific topics include price competition in the mortgage market and bankruptcy choice. Jason Allen received his PhD in economics from Queen’s University.
Staff Discussion Papers
The authors examine the degree of contestability in the Canadian banking system using the H-statistic proposed by Panzar and Rosse (1987) and modified by Bikker, Spierdijk, and Finnie (2006). A modification is necessary because the standard approach of controlling for size using total assets leads to an upward bias in the H-statistic. The authors propose […]
Staff Working Papers
Bank resolution is costly. In the United States, the Federal Deposit Insurance Corporation (FDIC) typically resolves failing banks by auction.
This paper combines loan-level administrative data with household-level survey data to analyze the impact of recent macroprudential policy changes in Canada using a microsimulation model of mortgage demand of first-time homebuyers.
We examine the impact of the 2009 amendments to the Canadian Bankruptcy and Insolvency Act on insolvency decisions. Rule changes steered debtors out of division I proposals and into the more cost-effective division II proposals.
We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral.
This paper measures market power in a decentralized market where contracts are determined through a search and negotiation process. The mortgage industry has many institutional features which suggest competitiveness: homogeneous contracts, negotiable rates, and, for a given consumer, common lending costs across lenders.
Using detailed loan transactions-level data we examine the efficiency of an overnight interbank lending market, and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no-arbitrage conditions on trades in the market.
We analyze the relationship between the intensity of banks’ use of soft-information and household bankruptcy patterns. Using a unique data set on the universe of Canadian household bankruptcies, we document that bankruptcy rates are higher in markets where the collection of soft, or qualitative locally gathered information, is the weakest.
This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process.
This paper explores the reliability of using prices of credit default swap contracts (CDS) as indicators of default probabilities during the 2007/2008 financial crisis.
Banks reliance on short-term funding has increased over time. While an effective source of financing in good times, the 2007 financial crisis has exposed the vulnerability of banks and ultimately firms to such a liability structure.
Bank of Canada Review Article
February 21, 2013
The Bank of Canada’s annual economic conference, held in October 2012, brought together experts from across Canada and around the world to discuss key issues concerning financial intermediation and vulnerabilities. The conference covered such topics as household finances and their relationship to financial stability, as well as bank regulation, securitization and shadow banking.
February 23, 2012
With increasing levels of household debt in recent years, the number of households that may be vulnerable to a negative economic shock is rising as well. Decisions made by both the debtor and the creditor can contribute to insolvency. This article presents some stylized facts about insolvency in Canada’s household sector and analyzes the role of creditors in insolvencies. The average debt of an individual filing for bankruptcy is more than 1.5 times that of an average Canadian household; bankruptcy filers tend to be unemployed or in low-wage jobs, and are typically renters. The article reports that banks that approve more loans per branch, which is interpreted as less-intensive use of soft information (such as the loan officer’s assessment of the applicant’s character), experience more client bankruptcies. This finding has important policy implications, because financial institutions that do not use soft information risk further deterioration in their lending portfolios.
February 17, 2011
This article begins with a brief examination of the Canadian mortgage market, focusing on the market’s evolution following changes to the Bank Act in 1992, which allowed chartered banks to enter the trust business, and the subsequent entrance of virtual banks and mortgage brokers.
June 14, 2007
Allen and Engert report on recent research at the Bank of Canada on various aspects of efficiency in the Canadian banking industry. This research suggests that, overall, Canadian banks appear to be relatively efficient producers of financial services and they do not exercise monopoly or collusive-oligopoly power. The authors note the value of continuing to investigate opportunities to improve efficiency and competition in financial services in Canada.
Financial System Review Article
- “Crisis Management in Canada: Analyzing Default Risk and Liquidity Demand during Financial Stress”, (with Alil Hortacsu and Jakub Kastl), Forthcoming AEJ: micro.
- “Variable pay: is it for the worker or the firm?”
(with James Thompson), Journal of Corporate Finance, October 2019, volume 58, p. 551-566.
- "Investment dealer collateral and leverage procyclicality",
(with Andrew Usher), Empirical Economics, 2020, 58(2), p. 489-505.
- "Search Frictions and Market Power in Negotiated Price Markets",
(with Robert Clark and Jean-Francois Houde). Journal of Political Economy, 2019, 127(4), p. 1550-1598.
- "The impact of bankruptcy reform on consumer insolvency choice"
(with Kiana Basiri), Canadian Public Policy, Volume 44 (2), p. 100-111.
- "The Impact of Macroprudential Housing Finance Tools in Canada"
(with Tim Grieder, Brian Peterson, and Tom Roberts), Journal of Financial Intermediation.
- "Consumer Bankruptcy, Bank Mergers, and Information"
(with Evren Damar and David Martinez-Miera), Review of Finance, July 2016, Volume 20, Issue 4, p. 1289-1320.
- "Bank Loans for Private and Public Firms in a Liquidity Crunch”
(with Teodora Paligorova), Journal of Financial Stability, vol. 18 (June), p. 106-116.
- "Efficiency and Bargaining Power in the Interbank Loan Market”
(with James Chapman, Federico Echenique and Matthew Shum), International Economic Review, May 2016, vol. 57(2), p. 691-716.
- "The Effect of Mergers in Search Markets: Evidence from the Canadian Mortgage Industry",
(with Robert Clark and Jean-Francois Houde). American Economic Review, 2014, 104(10), p. 3365-3396.
- "Price Dispersion in Mortgage Markets"
(with Robert Clark and Jean-Francois Houde). Journal of Industrial Economics, 2014, 62(3), p. 377-416.
- "Empirical Likelihood Block Bootstrapping,"
(with Allan W. Gregory and Katsumi Shimotsu), Journal of Econometrics, 2011, 161(2), p. 110-121.
- "Canadian City Housing Prices and Urban Market Segmentation,"
(with Robert Amano, David P. Byrne, and Allan W. Gregory). Canadian Journal of Economics, vol. 42(3), p. 1132-1149, 2009.
- "Size Matters: Covariance Matrix Estimation under the Alternative,"
The Econometrics Journal vol. 10(1), p. 637-644, 2007.
- "Efficiency and Economies of Scale of Large Canadian Banks,"
(with Ying Liu), Canadian Journal of Economics vol. 40(1), p. 225-244, 2007.
Work in progress
- “Identifying dependencies in the demand for government securities”
(with Jakub Kastl and Milena Wittwer)
- "Macroprudential Housing Policies and Borrowing Constraints"
(with Robert Clark and Jean-Francois Houde).