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The cost of borrowing Government of Canada treasury bills (t-bills) in the repurchase (repo) market is mainly explained by the relationship between the parties involved. Some pairs of parties conduct most of their repos for t-bills rather than bonds, and at relatively high borrowing costs. We speculate that these pairs have formed a mutually beneficial service relationship in which one party consistently receives t-bills, while the other receives cash at a relatively cheap rate.

I use a structural vector autoregression (SVAR) with sign restrictions to provide conditional evidence on the behavior of the US external finance premium (EFP). The results indicate that the excess bond premium, a proxy for the EFP, reacts countercyclically to supply and monetary policy shocks and procyclically to demand shocks.

We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending.

Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints.

Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

We conduct a randomized information experiment leveraging the Canadian Survey of Consumer Expectations. We provide causal evidence that respondents revise both their short- and medium-term expectations of future house price growth in a way that is consistent with observed short-term momentum in house prices. However, empirically, house price growth tends to revert to its mean in the medium term.

Government of Canada bonds in circulation that promise very similar payoffs can have different prices. We study the reason for these differences. Bonds that trade more often and earn high rental income in the repurchase agreement (repo) market tend to have higher prices. Bonds with longer tenors and times to maturity tend to have lower prices. This contrast between cheap and expensive bonds is important because trading volume and rental income can change rapidly, unlike tenor and time to maturity, which are stable.

The stability of the Canadian financial system, as well as its ability to support the Canadian economy, depends on the ability of financial institutions to absorb and manage major shocks. This is especially true for large banks, which perform services essential to the Canadian economy.

The ratio of non-financial corporate debt to gross domestic product in Canada has increased noticeably in recent years and is currently at an all-time high. In light of this development, we use a unique firm-level dataset to construct vulnerability indicators for the non-financial corporate sector in Canada.

Using new regulatory data on residential secured lending from Canadian banks, we assess the growth rate of home equity lines of credit (HELOCs).