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1783 Results

How well can large banks in Canada withstand a severe economic downturn?

We examine the potential impacts of a severe economic shock on the resilience of major banks in Canada. We find these banks would suffer significant financial losses but nevertheless remain resilient. This underscores the role well-capitalized banks and sound underwriting practices play in supporting economic activity in a downturn.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability JEL Code(s): E, E2, E27, E3, E37, E4, E44, G, G1, G2, G21, G23

Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification

Staff Working Paper 2022-24 Pablo Ottonello, Wenting Song
What effect do financial intermediaries have on the economy? We develop a strategy to isolate the effects of financial shocks on the economy using high-frequency data. Our findings show that intermediaries have a sizeable impact on nonfinancial firms—particularly those with high default risk and low liquidity.

Transmission of Cyber Risk Through the Canadian Wholesale Payment System

Staff Working Paper 2022-23 Anneke Kosse, Zhentong Lu
This paper studies how the impact of a cyber attack that paralyzes one or multiple banks' ability to send payments would transmit to other banks through the Canadian wholesale payment system. Based on historical payment data, we simulate a wide range of scenarios and evaluate the total payment disruption in the system.

Nonparametric Identification of Incomplete Information Discrete Games with Non-equilibrium Behaviors

Staff Working Paper 2022-22 Erhao Xie
This paper jointly relaxes two assumptions in the literature that estimates games. These two assumptions are the parametric restriction on the model primitives and the restriction of equilibrium behaviors. Without imposing the above two assumptions, this paper identifies the primitives of the game.
Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C57

Expectation-Driven Term Structure of Equity and Bond Yields

Staff Working Paper 2022-21 Ming Zeng, Guihai Zhao
Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield spreads).
Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G0, G00, G1, G12

Resilience of bank liquidity ratios in the presence of a central bank digital currency

Staff Analytical Note 2022-5 Alissa Gorelova, Bena Lands, Maria teNyenhuis
Could Canadian banks continue to meet their regulatory liquidity requirements after the introduction of a cash-like retail central bank digital currency (CBDC)? We conduct a hypothetical exercise to estimate how a CBDC could affect bank liquidity by increasing the run-off rates of transactional retail deposits under four increasingly severe scenarios.

More Than Words: Fed Chairs’ Communication During Congressional Testimonies

Staff Working Paper 2022-20 Michelle Alexopoulos, Xinfen Han, Oleksiy Kryvtsov, Xu Zhang
We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Increases in the Chair’s text-, voice-, or face-emotion indices during these testimonies generally raise stock prices and lower their volatility.

Identifying Financially Remote First Nations Reserves

Staff Discussion Paper 2022-11 Heng Chen, Walter Engert, Kim Huynh, Daneal O’Habib
Chen et al. (2021) show that almost one-third of First Nations band offices in Canada are within 1 kilometre (km) of an automated banking machine (ABM) or financial institution (FI) branch and more than half are within 5 km.
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