Sofia Priazhkina is a Senior Economist in the Banking and Payments Department at the Bank of Canada. She received her Ph.D. in Economics from Indiana University in 2016. She joined the Bank as a model developer in the Financial Stability Department, where she worked on the new generation of banking stress testing models within Basel III framework.  Sofia currently focuses on research in banking, financial networks, payments, CBDC and fintech. She uses game theory techniques, modern computational methods, and structural estimations as her primary modelling tools.

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Staff analytical notes

Modelling the Macrofinancial Effects of a House Price Correction in Canada

We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline.

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Staff working papers

Regulatory Requirements of Banks and Arbitrage in the Post-Crisis Federal Funds Market

Staff Working Paper 2022-48 Rodney J. Garratt, Sofia Priazhkina
This paper explains the nature of interest rates in the U.S. federal funds market after the 2007-09 financial crisis. We build a model of the over-the-counter lending market that incorporates new aspects of the financial system: abundance of liquidity, different regulatory standards for banks, and arbitrage opportunities created by limited access to the facility granting interest on excess reserves.

Quantum Monte Carlo for Economics: Stress Testing and Macroeconomic Deep Learning

Using the quantum Monte Carlo algorithm, we study whether quantum computing can improve the run time of economic applications and challenges in doing so. We apply the algorithm to two models: a stress testing bank model and a DSGE model solved with deep learning. We also present innovations in the algorithm and benchmark it to classical Monte Carlo.

Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions

Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina
Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

Information Sharing and Bargaining in Buyer-Seller Networks

Staff Working Paper 2016-63 Sofia Priazhkina, Frank H. Page
This paper presents a model of strategic buyer-seller networks with information exchange between sellers. Prior to engaging in bargaining with buyers, sellers can share access to buyers for a negotiated transfer. We study how this information exchange affects overall market prices, volumes and welfare, given different initial market conditions and information sharing rules.

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Bank publications

Financial System Hub articles

November 14, 2018

Financial System Resilience and House Price Corrections

We use models to better understand and assess how risks could affect the financial system. In our hypothetical scenario, a house price correction and elevated financial stress weigh on the economy. An increased number of households and businesses have difficulty repaying loans. Nonetheless, the large banks remain resilient.

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Journal publications

Journal articles

  • “Sharing market access in buyer–seller networks”, (with F. Page), Journal of Economic Theory, 175, 415-446.

Work in progress

  • “CBDC design and bank runs in a non-cashless society”.
  • “Digital payments between firms: network formation and quantum algorithm” (with Samuel Palmer, Pablo Martın-Ramiro, Roman Orus, Samuel Mugel and Vladimir Skavysh).
  • “Centralization in Lightning Network: economics of fees and network formation” (with James Chapman).