FSRC - Financial System Research Center
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Interbank Asset-Liability Networks with Fire Sale Management
Raising liquidity when funding is stressed creates pressure on the financial market. Liquidating large quantities of assets depresses their prices and may amplify funding shocks. How do banks weathering a funding crisis contribute to contagion risk? -
The Interplay of Financial Education, Financial Literacy, Financial Inclusion and Financial Stability: Any Lessons for the Current Big Tech Era?
The objective of this paper is twofold. First, we assess whether financial education might be a suitable tool to promote the financial inclusion opportunities that big techs provide. Second, we study how this potential financial inclusion could impact financial stability. -
Maturity Composition and the Demand for Government Debt
The main objectives of debt management are to raise stable and low-cost funding to meet the government’s financial needs and to maintain a well-functioning market for government securities. -
Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies
Can Bitcoin survive? Some say it will become vulnerable to attacks as the rewards for processing Bitcoin transactions continue to decline. The economics of fixed costs suggest the specialized hardware used to mine Bitcoin may be key to its survival. -
Dynamic Competition in Negotiated Price Markets
Repeated interactions between borrowers and lenders create the possibility of dynamic pricing: lenders compete aggressively with low prices to attract new borrowers and then raise their prices once borrowers have made a commitment. We find such pricing patterns in the Canadian mortgage market. -
The Term Structures of Loss and Gain Uncertainty
We investigate the uncertainty around stock returns at different investment horizons. Since a return is either a loss or a gain, we categorize return uncertainty into two components—loss uncertainty and gain uncertainty. We then use these components to evaluate investment. -
How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers
We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes. -
Learning, Equilibrium Trend, Cycle, and Spread in Bond Yields
This equilibrium model explains the trend in long-term yields and business-cycle movements in short-term yields and yield spreads. The less-frequent inverted yield curves (and less-frequent recessions) after the 1990s are due to recent secular stagnation and procyclical inflation expectations. -
Optimal Taxation in Asset Markets with Adverse Selection
What is the optimal tax schedule in over-the-counter markets, e.g., those for corporate bonds? I find that an optimal tax schedule is often non-monotonic. For example, trading of some high-price assets should be subsidized, and trading of some low-price assets should be taxed.