Narayan Bulusu is a Research Advisor in the Banking and Payments Department (BAP) at the Bank of Canada, working on topics related to large-value and retail payment systems. His current research interests lie in the domain of payment system design and its implications for the financial system. He previously worked on interbank markets, and on models pertaining to the management of Canada’s sovereign debt and foreign reserves. He obtained a PhD in financial economics from IESE Business School.
This paper documents the properties of Government of Canada securities in cash, repo and securities lending transactions over their life cycle. By tracking every security from issuance to maturity, we are able to highlight inter-linkages between the markets for cash and for specific securities.
Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.
We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by borrowers.
The common-factor hypothesis is one possible explanation for the housing wealth effect. Under this hypothesis, house price appreciation is related to changes in consumption as long as the available proxies for the common driver of housing and non-housing demand are noisy and housing supply is not perfectly elastic.
Data on the use of government securities in the repo, securities lending and cash markets suggest there are bond market clienteles in Canada. Shorter-term bonds are more prevalent in the repo market, while longer-maturity securities are more active in the securities lending market—consistent with the preferred habitat hypothesis. These results could help design better debt-management strategies and more-effective policies to maintain well-functioning financial markets.
The Bank of Canada recently developed an asset-liability-matching model to aid in the management of Canada’s foreign exchange reserves. The model allows policy-makers at the Bank and the Department of Finance to analyze asset-allocation and funding-mix decisions by quantifying both the risk-return and liquidity trade-offs for the assets, as well as the risk-cost trade-offs of the funding liabilities.
"What drives interbank loans? Evidence from Canada." (joint with Pierre Guérin) Journal of Banking & Finance 106 (2019): 427-444.
"Evolving Practices in Public Investment Management: Proceedings of the Seventh Public Investors Conference" (jointly edited with Eric Bouyé, Marco Fanari; Patrizia Ferrauto, Mike McMorrow, Shengting Pan, Tommaso Perez, Vahe Sahakyan, and Omar Zulaica)
"Advances in the practice of public investment management" (edited with Joachim Coche, Alejandro Reveiz, Francisco Rivadeneyra, Vahe Sahakyan and Ghislain Yanou), 2018, Palgrave Macmillan