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This paper explores the impact of extreme weather exposures on the financial outcomes of low-income households. Our findings highlight the heightened financial vulnerability of low-income households to environmental shocks and underscore the need for targeted policies.

We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure.

We find that minority households see greater declines in housing returns and entries into homeownership than White households after a tightening of monetary policy. Our findings emphasize the unintended consequences of monetary policy on racial inequality in the housing market.

We assess the potential financial risks of current and projected flooding caused by extreme weather events in Canada. We focus on the residential real estate secured lending (RESL) portfolios of Canadian financial institutions (FIs) because RESL portfolios are an important component of FIs’ balance sheets and because the assets used to secure such loans are immobile and susceptible to climate-related extreme weather events.

We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact.

We investigate alternative student debt contracts that defer payments and ease the burden of student loans on US households by preserving disposable income early in borrowers’ lives. Our model shows substantial welfare gains from these contracts relative to existing plans and gains similar to the Biden administration's proposals but with a significantly lower cost.

Options markets offer unique insights into the changing risks different assets face, which helps us better understand the broader risks to the Canadian economy. We show how option prices help reveal that investors did not anticipate large downside risks to either major Canadian banks or economic growth during the March 2023 financial sector system stress, a period when policy-makers and investors were unsure of what the future held for Canada’s economy.

A large-scale reduction in mortgage principal can strengthen a recovery, support house prices and lower foreclosures. The nature of the intervention shapes its impact, which rests on how resources are redistributed across households. The availability of bankruptcy on unsecured debt changes the response to large-scale mortgage relief by reducing precautionary savings.

We study whether the credit derivatives of firms reflect the risk from climate transition. We find that climate transition risk has asymmetric and significant economic impacts on the credit risk of more vulnerable firms, and negligible effects on other firms.

I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices.