Miguel Molico was appointed Senior Research Director of the Financial Stability Department (FSD) in February 2014. In this role, he is part of both the Economic and Financial Research (EFR) team and the Financial Stability Department’s senior leadership team and oversees the modelling and research divisions of FSD. He previously held the role of Director of Research in the Funds Management and Banking Department (FBD) since 2010.
Miguel primary research interests include monetary theory, monetary policy implementation, and payment systems. His research has been published in leading academic journals, including the Journal of Monetary Economics, the Journal of Economic Theory, the International Economic Review and the Journal of Money, Credit and Banking.
Prior to joining the Bank in 2006, Miguel held academic positions at the Penn State University and the University of Western Ontario. He holds a PhD in economics from the University of Pennsylvania.
Staff Discussion Papers
This paper reviews the Canadian and international evidence of the effectiveness of macroprudential policy measures in building resilience and mitigating financial imbalances. The analysis concludes that these measures have broadly achieved their goal of increasing the overall resilience of the financial system to the buildup of imbalances and increasing the financial system’s ability to withstand adverse shocks.
Because financial and macroeconomic conditions are tightly interconnected, financial stability considerations are an important element of any monetary policy framework. Yet, the circumstances under which it would be appropriate for the Bank to use monetary policy to lean against financial risks need to be more fully specified (Côté 2014).
The authors review recent developments in retail payments in Canada and elsewhere, with a focus on e-money products, and assess their potential public policy implications.
Staff Working Papers
We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral.
This paper studies the welfare costs and the redistributive effects of inflation in the presence of idiosyncratic liquidity risk, in a micro-founded search-theoretical monetary model. We calibrate the model to match the empirical aggregate money demand and the distribution of money holdings across households, and study the effects of inflation under the implied degree of market incompleteness.
This paper develops a model of settlement system to study the endogenous structure of settlement networks, and the welfare consequences of clearing agent failure. The equilibrium degree of tiering is endogenously determined by the cost structure and the information structure.
This paper studies the long run welfare costs of inflation in a micro-founded model with trading frictions and costly liquidity management.
Bank of Canada Review Article
May 17, 2012
The Bank of Canada’s annual conference, held in November 2011, brought together leading researchers from universities, central banks and other institutions from around the world. Divided into four sessions plus two keynote addresses, the conference covered such topics as the use of cash and other means of payment in retail transactions, large-value payments systems, and […]
November 17, 2011
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 Article
- "Central Bank Haircut Policy," (with James Chapman and Jonathan Chiu) Annals of Finance, August 2011, 7 (3), p.319-348.
- "Uncertainty, Inflation, and Welfare," (with Jonathan Chiu) Journal of Money, Credit, and Banking, 43: 487-512.
- "Liquidity, Redistribution, and the Welfare Cost of Inflation," (with Jonathan Chiu) Journal of Monetary Economics, 57 (4) 2010:428-38.
- "The Distribution of Money and Prices in Search Equilibrium," International Economic Review, 47 (3), 2006: 701-22.
- "Indivisibilities, Lotteries, and Monetary Exchange," (with Alexander Berentsen and Randall Wright), Journal of Economic Theory, 107 (1) 2002: 70-94.
- "A Model of Tiered Settlement",
(with J, chapman and J. Chiu), Journal of Money, credit and Banking.
- "Production Synergies, Technology Adoption, Unemployment, and Wages",
(with Gwen Eudey), Finance and Economics Discussion Series, 2001-29, Federal Reserve Board, Washington, DC.