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Models with default options are hard to solve. We propose an extension of the endogenous grid method that solves default risk models more efficiently and accurately.

We investigate the effect of inflation on output and welfare in the laboratory. Consistent with monetary theory, we find that inflation acts as a tax on monetary exchange and reduces output and welfare.

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.

We show how participants in Canada’s new high-value payment system save liquidity by exploiting the new gridlock resolution arrangement. The findings have important implications for the design of these systems and shed light on financial institutions’ liquidity preference.

Banks’ business interactions create a network of relationships that are hidden in the correlations of bank stock returns. But for policy interventions, we need causality to understand how the network changes. Thus, this paper looks for the causal network anticipated by investors.

We consider structural vector autoregressions that are identified through stochastic volatility. Our analysis focuses on whether a particular structural shock can be identified through heteroskedasticity without imposing any sign or exclusion restrictions.

This paper studies non-parametric combinations of density forecasts. We introduce a regression tree-based approach that allows combination weights to vary on the features of the densities, time-trends or economic indicators. In two empirical applications, we show the benefits of this approach in terms of improved forecast accuracy and interpretability.

In recent years, significant efforts have been made to attract more women into academia and to support their careers, with the goal of increasing their representation.

This article examines what market conditions lead to extreme losses in global financial systems. Using a reverse stress testing approach, it introduces two measures of systemic risk by starting from the tail losses and working backward to identify the events most closely associated with them.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.