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229 result(s)

Market Concentration and Uniform Pricing: Evidence from Bank Mergers

Staff Working Paper 2021-9 João Granja, Nuno Paixao
We show that US banks price deposits almost uniformly across their branches and that this pricing practice is more important than increases in local market concentration in explaining the deposit rate dynamics following bank mergers.

Estimating Policy Functions in Payments Systems Using Reinforcement Learning

We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information.

Consumer Credit with Over-optimistic Borrowers

When lenders cannot directly identify behavioural and rational borrowers, they use type scoring to track the likelihood of a borrower’s type. This leads to the partial pooling of borrowers, which results in rational borrowers subsidizing borrowing costs for behavioural borrowers. This, in turn, reduces the effectiveness of regulatory policies that target mistakes by behavioural borrowers.

The Heterogeneous Effects of COVID-19 on Canadian Household Consumption, Debt and Savings

Staff Working Paper 2020-51 James (Jim) C. MacGee, Thomas Michael Pugh, Kurt See
The impact of COVID-19 on Canadian households’ debt and unplanned savings varies by household income. Low-income and high-income households accrued unplanned savings, while middle-income households tended to accumulate more debt.

Concentration in the market of authorized participants of US fixed-income exchange-traded funds

We show that a small number of authorized participants (APs) actively create and redeem shares of US-listed fixed-income exchange-traded funds (FI-ETFs). In 2019, three APs performed 82 percent of gross creations and redemptions of FI-ETF shares. In contrast, the group of active APs for equity ETFs was much more diverse.

Announcing the Bankers’ Acceptance Purchase Facility: a COVID‑19 event study

Staff Analytical Note 2020-23 Rohan Arora, Sermin Gungor, Kaetlynd McRae, Jonathan Witmer
The Bank of Canada launched the Bankers’ Acceptance Purchase Facility (BAPF) to ensure that the bankers’ acceptance (BA) market could continue to function well during the financial crisis induced by the COVID‑19 pandemic. We review the impact that the announcement of this facility had on BA yields in the secondary market. We find that BA yield spreads declined by 15 basis points on the day of the announcement and by up to 70 basis points over a longer period. Using an econometric framework, we quantify the effect of the announcement and confirm early assertions presented in the Bank’s 2020 Financial System Review.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23

On Causal Networks of Financial Firms: Structural Identification via Non-parametric Heteroskedasticity

Staff Working Paper 2020-42 Ruben Hipp
Various business interactions of banks create a network of hidden relationships, which cannot be directly inferred from the correlation of bank stock returns. Without causality, it remains unclear how policy interventions change the network. Thus, this paper aims to find the causal network as anticipated by investors.

Security and convenience of a central bank digital currency

Staff Analytical Note 2020-21 Charles M. Kahn, Francisco Rivadeneyra
An anonymous token-based central bank digital currency (CBDC) would pose certain security risks to users. These risks arise from how balances are aggregated, from their transactional use and from the competition between suppliers of aggregation solutions.

Interbank Asset-Liability Networks with Fire Sale Management

Staff Working Paper 2020-41 Zachary Feinstein, Grzegorz Halaj
Raising liquidity when funding is stressed creates pressure on the financial market. Liquidating large quantities of assets depresses their prices and may amplify funding shocks. How do banks weathering a funding crisis contribute to contagion risk?

Predicting Payment Migration in Canada

Staff Working Paper 2020-37 Anneke Kosse, Zhentong Lu, Gabriel Xerri
Developments are underway to replace Canada’s two core payment systems with three new systems. We use a discrete choice model to predict migration patterns of end-users and financial institutions for future systems and discuss their policy implications.