Miguel Molico
Senior Research Director
- Ph.D., University of Pennsylvania (1997)
- M.A., University of Pennsylvania (1994)
- B.A. Economics (Licenciatura), Universidade Nova de Lisboa (1991)
Bio
Miguel Molico was appointed Senior Research Director in the Financial Markets Department (FMD) in February 2024. In this role, he provides strategic direction and leadership for FMD’s research and policy work. In recent years, Miguel led the Bank’s analysis and research on the financial stability implications of climate change.
Previously, he held the role of Senior Research Director in FSD from 2014 to 2020, and in the Funds Management and Banking Department (FBD) between 2010 and 2014. Prior to joining the Bank in 2006, Miguel held academic positions at the University of Western Ontario and Penn State University. He holds a PhD in economics from the University of Pennsylvania.
Miguel primary research interests include monetary theory, monetary policy implementation, climate change, 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, the Review of Economic Dynamics, and the Journal of Money, Credit and Banking.
Staff discussion papers
Transition Scenarios for Analyzing Climate-Related Financial Risk
Climate transition scenarios clarify climate-related risks to our economy and financial system. This paper summarizes key results of Canada-relevant scenarios developed in a pilot project on climate risk by the Bank of Canada and the Office of the Superintendent of Financial Institutions.On the Nexus of Monetary Policy and Financial Stability: Effectiveness of Macroprudential Tools in Building Resilience and Mitigating Financial Imbalances
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.On the Nexus of Monetary Policy and Financial Stability: Recent Developments and Research
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).Electronic Money and Payments: Recent Developments and Issues
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
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.Central Bank Haircut Policy
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.Uncertainty, Inflation, and Welfare
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.A Model of Tiered Settlement Networks
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.Liquidity, Redistribution, and the Welfare Cost of Inflation
This paper studies the long run welfare costs of inflation in a micro-founded model with trading frictions and costly liquidity management.Technical reports
Assessing Climate-Related Financial Risk: Guide to Implementation of Methods
A pilot project on climate transition scenarios by the Bank of Canada and the Office of the Superintendent of Financial Institutions assessed climate-related credit and market risks. This report describes the project’s methodologies and provides guidance on implementing them.Bank publications
Bank of Canada Review articles
May 17, 2012
Conference Summary: New Developments in Payments and Settlement
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
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 Hub articles
January 15, 2024
Flood risk and residential lending
We present key findings of a recent study that evaluates the credit risk that flooding poses to the residential lending activities of Canadian banks and credit unions. Results show that such risk currently appears modest but could become larger with climate change.Financial System Review articles
Journal publications
Refereed Journal Articles
- J. Chiu and M. Molico, "Short-Run Dynamics in a Search-Theoretic Model of Monetary Exchange," Review of Economic Dynamics, vol. 42 (October 2021): 133-155.
- J. Chapman, J. Chiu and M. Molico, "A Model of Tiered Settlement Networks," Journal of Money, Credit and Banking, vol. 45(2-3) (March 2013): 327-347.
- J. Chapman, J. Chiu and M. Molico, "Central Bank Haircut Policy," Annals of Finance, vol. 7(3) (August 2011): 319-48.
- J. Chiu and M. Molico, "Uncertainty, Inflation, and Welfare," Journal of Money, Credit and Banking, vol. 43 (October 2011): 487-512.
- J. Chiu and M. Molico, "Liquidity, Redistribution, and the Welfare Cost of Inflation," Journal of Monetary Economics, vol. 57(4) (May 2010): 428-38.
- M. Molico, "The Distribution of Money and Prices in Search Equilibrium," International Economic Review, vol. 47(3) (August 2006): 701-22.
- A. Berentsen, M. Molico and R. Wright, Randall, 2002. "Indivisibilities, Lotteries, and Monetary Exchange," Journal of Economic Theory, vol. 107(1) (November 2002): 70-94.