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82 Results

Optimal Monetary and Macroprudential Policies

Staff Working Paper 2021-21 Josef Schroth
Macroprudential policy should aim for bank balance sheets that are larger and safer during normal times but smaller and riskier during financial crises. During recoveries from financial crises, monetary policy should complement macroprudential policy by being less expansive than what would be required to close the labour gap.

Update on housing market imbalances and household indebtedness

Staff Analytical Note 2021-4 Mikael Khan, Olga Bilyk, Matthew Ackman
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.

Market Concentration and Uniform Pricing: Evidence from Bank Mergers

Staff Working Paper 2021-9 João Granja, Nuno Paixao
We show that US banks price deposits almost uniformly across their branches and that this pricing practice is more important than increases in local market concentration in explaining the deposit rate dynamics following bank mergers.

Predicting Payment Migration in Canada

Staff Working Paper 2020-37 Anneke Kosse, Zhentong Lu, Gabriel Xerri
Developments are underway to replace Canada’s two core payment systems with three new systems. We use a discrete choice model to predict migration patterns of end-users and financial institutions for future systems and discuss their policy implications.

Household indebtedness risks in the wake of COVID‑19

Staff Analytical Note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée
COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults.

The Cyber Incident Landscape

Staff Analytical Note 2019-32 Nikil Chande, Dennis Yanchus
The Canadian financial system is vulnerable to cyber threats. But for many firms, cyber risk is difficult to quantify. We examine public information on past cyber incidents to better understand the current risk landscape and find that a holistic view is needed to fully grasp the nature of this risk.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Financial stability JEL Code(s): G, G2, G28, M, M1, M15, O, O3, O33, O38

Loan Insurance, Market Liquidity, and Lending Standards

Staff Working Paper 2019-47 Toni Ahnert, Martin Kuncl
We examine loan insurance—credit risk transfer upon origination—in a model in which lenders can screen, learn loan quality over time, and can sell loans. Some lenders with low screening ability insure, benefiting from higher market liquidity of insured loans while forgoing the option to exploit future information about loan quality.

Assessment of Liquidity Creation in the Canadian Banking System

Staff Analytical Note 2019-30 Annika Gnann, Sahika Kaya
Liquidity creation is a fundamental function of banks. It provides the public with easy access to funds. These funds are important because they allow households and businesses to consume and invest. In this note, we measure liquidity creation by Canadian financial institutions from the first quarter of 2012 to the second quarter of 2019, using a methodology suggested by Berger and Bouwman (2009) and known as the BB measure.

Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation

Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel
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.

Privacy as a Public Good: A Case for Electronic Cash

Staff Working Paper 2019-24 Rod Garratt, Maarten van Oordt
Cash gives users a high level of privacy when making payments, but the use of cash to make payments is declining. People increasingly use debit cards, credit cards or other methods to pay.