Thibaut Duprey is the Director of Model Development and Research in the Financial Stability Department. His main interests include macro-financial linkages, banking theory, systemic risks, financial crises, and the associated prudential policies. In addition, he has contributed to the integration of financial stability considerations in the monetary policy framework. Before joining the bank, he was an economist at the Financial Stability Directorate of the Banque de France. He received his Ph.D. in Economics from the Paris School of Economics.
Staff analytical notes
Natural disasters occur more often than before, potentially exposing households to financial distress. We study the intersection between household financial vulnerabilities and severe weather events.
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.
Financial system vulnerabilities increase the downside risk to future GDP growth. Macroprudential tightening significantly reduces financial stability risks associated with vulnerabilities. Monetary policy faces a trade-off between financial stability and macroeconomic risks.
When financial system vulnerabilities are elevated, they can give rise to asymmetric risks to the economic outlook. To illustrate this, I consider the economic outlook presented in the Bank of Canada’s October 2017 Monetary Policy Report in the context of two key financial system vulnerabilities: high levels of household indebtedness and housing market imbalances.
Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress.
This note presents a composite indicator of Canadian financial system vulnerabilities—the Vulnerabilities Barometer. It aims to complement the Bank of Canada’s vulnerabilities assessment by adding a quantitative and synthesized perspective to the more granular (distributional) analysis presented in the Financial System Review.
Staff discussion papers
Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns.
Staff working papers
The COVID-19 pandemic highlighted the need for policy-makers to closely monitor disruptions to the retail and food business sectors. We present a new method to measure business opening and closing rates using real-time data from Google Places, the dataset behind the Google Maps service.
Can central bank and government policies impact the risks around the outlook for GDP growth? We find that fiscal stimulus makes strong GDP growth more likely—even more so when monetary policy is constrained—rather than weak GDP growth less likely. Thus, fiscal stimulus should accelerate the recovery phase of the COVID-19 pandemic.
Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs.
This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state.
Production efficiency and financial stability do not necessarily go hand in hand. With heterogeneity in banks’ abilities to screen borrowers, the market for loans becomes segmented and a self-competition mechanism arises. When heterogeneity increases, the intensive and extensive margins have opposite effects.
This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index.
We present a new corporate default model, one of the building blocks of the Bank of Canada’s bank stress-testing infrastructure. The model is used to forecast corporate loan losses of the Canadian banking sector under stress.
Financial System Hub articles
November 14, 2018
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.
- "Do publicly-owned banks lend against the wind?" (2015). International Journal of Central Banking, 11(2), pages 65-112.
- “Dating Systemic Financial Stress Episodes in the EU Countries” (2017). Journal of Financial Stability, 32, pages 30-56. Joint with Benjamin Klaus and Tuomas Peltonen.
- “Canadian Financial Stress and Macroeconomic Condition” (2020). Canadian Public Policy, 46(S3), pages S236-S260.
- “Online estimation for a predictive analytics platform with a financial-stability-analysis application” (2021). European Journal of Control, 57, pages 205-221. Joint with Xing Gu, Rogemar Mamon and Heng Xiong.
- “Early warning or too late? A (pseudo-)real-time identification of leading indicators of financial stress” (2022). Journal of Banking and Finance, 138. Joint with Benjamin Klaus.
- “Systemic Financial Stress and Macroeconomic Amplifications in the United Kingdom” (2022). Oxford Bulletin of Economics and Statistics, 84(2), pages 380-400. Joint with Somnath Chatterjee, Ching-Wai (Jeremy) Chiu and Sinem Hacioglu-Hoke.
- “Business Closures and (Re)Openings in Real-Time Using Google Places: Proof of Concept” (2022). Journal of Risk and Financial Management, 15(4). Joint with Daniel E. Rigobon, Artur Kotlicki, Philip Schnattinger, Soheil Baharian and Thomas R. Hurd.