Jonathan Chiu
Senior Research Advisor
- Ph.D. in Economics, University of Western Ontario (2005)
Bio
Jonathan Chiu is a Senior Research Advisor in the Banking and Payments Department (BAP). His main research interests concern monetary theory, banking, payments and financial infrastructures. He also teaches monetary theory at Queen’s University. Jonathan received his PhD in economics from the University of Western Ontario.
Staff analytical notes
Staff discussion papers
Central Bank Digital Currencies and Banking: Literature Review and New Questions
We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.Public Policy Objectives and the Next Generation of CPA Systems: An Analytical Framework
The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems.Staff working papers
Public and Private Money Creation for Distributed Ledgers: Stablecoins, Tokenized Deposits, or Central Bank Digital Currencies?
This paper explores the implications of introducing digital public and private monies (e.g. tokenized central bank digital currency [CBDC] or tokenized deposits) for stablecoins and illicit crypto transactions.Understanding DeFi Through the Lens of a Production-Network Model
We develop a production-network model to capture how decentralized finance (DeFi) has evolved across different sectors of financial services. The model allows us to measure the value added by different DeFi sectors and to study how the connections across the sectors influence token prices.On the Fragility of DeFi Lending
We develop a dynamic model to capture key features of decentralized finance lending. We identify a price-liquidity feedback: the market outcome in any given period depends on agents' expectations about lending activities in future periods, with higher future price expectations leading to more lending and higher prices in that period.Grasping De(centralized) Fi(nance) Through the Lens of Economic Theory
We analyze the value proposition and limitations of decentralized finance (DeFi). Based on a distributed ledger and smart contracts, DeFi can guarantee the execution of financial contracts, potentially lowering the costs of intermediation and improving financial inclusion.PayTech and the D(ata) N(etwork) A(ctivities) of BigTech Platforms
Why do BigTech platforms introduce payment services? We explore this using a model in which a monopoly platform faces a trade-off between the costs associated with privacy concerns and the revenue from data services. We then analyze the feedback effects between data and payments.What Drives Bitcoin Fees? Using Segwit to Assess Bitcoin's Long-Run Sustainability
We explore what drives transaction fees in the Bitcoin system and consider whether Bitcoin can remain tamper proof in the long run.Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design
Should a CBDC be more like cash or bank deposits? An interest-bearing, cash-like CBDC not only makes payments more efficient but also increases total demand. This has positive effects on other transactions, inducing more deposit taking and lending and, thus, bank intermediation.Payments on Digital Platforms: Resiliency, Interoperability and Welfare
This paper studies the business model choice between running a cash platform and a token platform, as well as its welfare and policy implications.Safe Payments
In a cashless economy, would the private sector invest in the optimal level of safety in a deposit-based payment system? In general, because of externalities, the answer is no. While the private sector could over- or under-invest in safety, the government can use taxes or subsidies to correct private incentives.Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange
We study the short-run effects of monetary policy using a search-theoretic monetary model in which agents are subject to idiosyncratic shocks and aggregate monetary shocks.Bank publications
Bank of Canada Review articles
November 17, 2011
Liquidity Provision and Collateral Haircuts in Payments Systems
Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market.Financial System Review articles
Journal publications
Journal articles
- “Relationships in the Interbank Market”
(with Jens Eisenschmidt and Cyril Monnet) in Review of Economic Dynamics, Forthcoming. - “Blockchain-based Settlement for Asset Trading”
(with Thorsten Koeppl) in Review of Financial Studies, Volume 32(5), p. 1716-1753, May 2019. - “On the Welfare Effects of Credit Arrangements”
(with Mei Dong and Enchuan Shao) in International Economic Review, Volume 59.3 p. 1621-1651 August 2018. - “Innovation and Growth with Financial, and other, Frictions”
(with Césaire Meh and Randall Wright) in International Economic Review, 58, p. 95-125, February 1 2017 - “Trading Dynamics with Adverse Selection and Search: Market Freeze, Intervention and Recovery”
(with Thorsten Koeppl) in Review of Economic Studies, Volume 83, Issue 3, p. 969-1000, July 2016. - “Endogenously Segmented Asset Market in an Inventory Theoretic Model of Money Demand” in Macroeconomic Dynamics, Volume 18, p 438-472, March 2014.
- “A Model of Tiered Settlement”
(with James Chapman and Miguel Molico) in Journal of Money, Credit and Banking, Volume 45, Issue 2-3, pages 327–347, March-April 2013. - “Central Bank Haircut Policy”
(with James Chapman and Miguel Molico) in Annals of Finance, Volume 7(3), p. 319-348, August 2011. - “Financial Intermediation, Liquidity and Inflation”
(with Césaire Meh) in Macroeconomic Dynamics, Volume 15, p. 83-118, April 2011. - “Uncertainty, Welfare and Inflation”
(with Miguel Molico) in Journal of Money, Credit, and Banking, Volume 43, p. 487-512, October 2011. - “Liquidity, Redistribution, and the Welfare Cost of Inflation”
(with Miguel Molico) in Journal of Monetary Economics, Volume 57(4), p. 428-438, May 2010.
Other
Book chapter
- “Incentive Compatibility on the Blockchain”
(with Thorsten Koeppl) in W. Trockel and L. Hurwicz (Eds) Social design : essays in memory of Leonid Hurwicz. Cham: Springer, 2019.
Research
- “The Economics of Cryptocurrencies – Bitcoin and Beyond”
(with Thorsten Koeppl). - “Short-run Dynamics in a Search-Theoretic Model of Monetary Exchange”
(with Miguel Molico). - “Central Bank Digital Currency and Banking”
(with Mohammad Davoodalhosseini, Janet Hua Jiang and Yu Zhu).