FSRC - Financial System Research Center

• Financial Conditions and the Money-Output Relationship in Canada

  Staff Working Paper 2012-33 Maral Kichian

  We propose a drifting-coefficient model to empirically study the effect of money on output growth in Canada and to examine the role of prevailing financial conditions for that relationship. We show that such a time-varying approach can be a useful way of modelling the impact of money on growth, and can partly reconcile the lack of concensus in the literature on the question of whether money affects growth.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Monetary aggregates JEL Code(s): E, E4, E44, E5, E51

• Canadian Bank Balance-Sheet Management: Breakdown by Types of Canadian Financial Institutions

  Staff Discussion Paper 2012-7 David Xiao Chen, H. Evren Damar, Hani Soubra, Yaz Terajima

  The authors document leverage, capital and liquidity ratios of banks in Canada. These ratios are important indicators of different types of risk with respect to a bank’s balance‐sheet management. Particular attention is given to the observations by different types of banks, including small banks that historically received less attention.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G21, G28

• Price Negotiation in Differentiated Products Markets: Evidence from the Canadian Mortgage Market

  Staff Working Paper 2012-30 Jason Allen, Robert Clark, Jean-François Houde

  This paper measures market power in a decentralized market where contracts are determined through a search and negotiation process. The mortgage industry has many institutional features which suggest competitiveness: homogeneous contracts, negotiable rates, and, for a given consumer, common lending costs across lenders.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Market structure and pricing JEL Code(s): D, D4, G, G2, G21, L, L2, L22

• Efficiency and Bargaining Power in the Interbank Loan Market

  Staff Working Paper 2012-29 Jason Allen, James Chapman, Federico Echenique, Matthew Shum

  Using detailed loan transactions-level data we examine the efficiency of an overnight interbank lending market, and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no-arbitrage conditions on trades in the market.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Payment clearing and settlement systems JEL Code(s): C, C7, C71, E, E5, E58, G, G2, G21, G28

• The Bank of Canada’s 2009 Methods-of-Payment Survey: Methodology and Key Results

  Staff Discussion Paper 2012-6 Carlos Arango, Angelika Welte

  The authors present the methodology and main findings of the Bank of Canada’s 2009 Methods-of-Payment survey, a detailed investigation of consumer payment behaviour in Canada. The survey targeted the 18- to 75-year-old Canadian resident population.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4

• Systematic Risk, Debt Maturity and the Term Structure of Credit Spreads

  Staff Working Paper 2012-27 Hui Chen, Yu Xu, Jun Yang

  We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt, long-term debt is less prone to rollover risks, but its illiquidity raises the costs of financing.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Debt management JEL Code(s): G, G3, G32, G33

• 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.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability, Market structure and pricing JEL Code(s): F, F3, F30, G, G0, G01, G1, G18, G2, G20

• Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

  Staff Working Paper 2012-24 Naoki Wakamori, Angelika Welte

  Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Econometric and statistical methods, Financial services JEL Code(s): C, C2, D, D1, G, G2

• The Ex-Ante Versus Ex-Post Effect of Public Guarantees

  Staff Working Paper 2012-22 H. Evren Damar, Reint Gropp, Adi Mordel

  In October 2006, Dominion Bond Rating Service (DBRS) introduced new ratings for banks that account for the potential of government support. The rating changes are not a reflection of any changes in the respective banks’ credit fundamentals.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G21, G28, G3, G32

• Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound

  Staff Working Paper 2012-21 Christiane Baumeister, Luca Benati

  We explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a time-varying parameter structural VAR model.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Interest rates, Monetary policy framework, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E5, E52, E58