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98 Results

The ‘Celtic Crisis’: Guarantees, Transparency and Systemic Liquidity Risk

Staff Working Paper 2013-31 Philipp König, Kartik Anand, Frank Heinemann
Bank liability guarantee schemes have traditionally been viewed as costless measures to shore up investor confidence and prevent bank runs. However, as the experiences of some European countries, most notably Ireland, have demonstrated, the credibility and effectiveness of these guarantees are crucially intertwined with the sovereign’s funding risks.

Fire-Sale FDI or Business as Usual?

Staff Working Paper 2013-17 Ron Alquist, Rahul Mukherjee, Linda Tesar
Using a new data set, we examine the characteristics and dynamics of cross-border mergers and acquisitions during emerging-market financial crises, that is, so-called “fire-sale FDI.” Our findings shed fresh light on whether the transactions undertaken during crisis periods differ in fundamental ways from those undertaken during more tranquil periods.

A Semiparametric Early Warning Model of Financial Stress Events

Staff Working Paper 2013-13 Ian Christensen, Fuchun Li
The authors use the Financial Stress Index created by the International Monetary Fund to predict the likelihood of financial stress events for five developed countries: Canada, France, Germany, the United Kingdom and the United States.

Financial Crisis Resolution

Staff Working Paper 2012-42 Josef Schroth
This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks’ desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis.
November 15, 2012

Financial Transaction Taxes: International Experiences, Issues and Feasibility

The financial transaction tax (FTT) is a policy idea with a long history that, in the wake of the global financial crisis, has attracted renewed interest in some quarters. This article examines the evidence of the impact of an FTT on market quality and explores a few of the practical issues surrounding the implementation of an FTT. Proponents argue that an FTT will generate substantial tax revenues and reduce market volatility. The majority of the empirical evidence, however, supports the arguments of opponents of the tax who assert that an FTT reduces volume and liquidity and increases volatility. In addition, there are numerous challenges in implementing an FTT, which may reduce the intended revenues. Whether an FTT is beneficial hinges on its effect on market quality and its ability to raise revenues. However, there are many unanswered questions regarding its design.

Does the Buck Stop Here? A Comparison of Withdrawals from Money Market Mutual Funds with Floating and Constant Share Prices

Staff Working Paper 2012-25 Jonathan Witmer
Recent reform proposals call for an elimination of the constant net asset value (NAV) or “buck” in money market mutual funds to reduce the occurrence of runs. Outside the United States, there are several countries that have money market mutual funds with and without constant NAVs.

Estimating the Demand for Settlement Balances in the Canadian Large Value Transfer System

Staff Working Paper 2012-15 Nellie Zhang
This paper applies a static model of an interest rate corridor to the Canadian data, and estimates the aggregate demand for central-bank settlement balances in the Large Value Transfer System (LVTS).
May 17, 2012

Understanding Systemic Risk in the Banking Sector: A MacroFinancial Risk Assessment Framework

The MacroFinancial Risk Assessment Framework (MFRAF) models the interconnections between liquidity and solvency in a financial system, with multiple institutions linked through an interbank network. The MFRAF integrates funding liquidity risk as an endogenous outcome of the interactions between solvency risk and the liquidity profiles of banks, which is a complementary approach to the new […]

What Matters in Determining Capital Surcharges for Systemically Important Financial Institutions?

Staff Discussion Paper 2011-9 Céline Gauthier, Toni Gravelle, Xuezhi Liu, Moez Souissi
One way of internalizing the externalities that each individual bank imposes on the rest of the financial system is to impose capital surcharges on them in line with their systemic importance.
Content Type(s): Staff research, Staff discussion papers Topic(s): Financial system regulation and policies JEL Code(s): C, C1, C15, C8, C81, E, E4, E44, G, G0, G01, G2, G21

Analyzing Default Risk and Liquidity Demand during a Financial Crisis: The Case of Canada

Staff Working Paper 2011-17 Jason Allen, Ali Hortaçsu, Jakub Kastl
This paper explores the reliability of using prices of credit default swap contracts (CDS) as indicators of default probabilities during the 2007/2008 financial crisis.
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