FSRC - Financial System Research Center

• A Framework to Assess Vulnerabilities Arising from Household Indebtedness Using Microdata

  Staff Discussion Paper 2012-3 Ramdane Djoudad

  Rising levels of household indebtedness have created concerns about the vulnerabilities of households to adverse economic shocks and the impact on financial stability. To assess these risks, the author presents a formal stress-testing framework that uses microdata to simulate how various economic shocks affect the distribution of the debt-service ratio (DSR) for the household sector.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C15, C3, C31, D, D1, D14, E, E5, E51

• Macroprudential Rules and Monetary Policy when Financial Frictions Matter

  Staff Working Paper 2012-6 Jeannine Bailliu, Césaire Meh, Yahong Zhang

  This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Financial stability, Monetary policy framework JEL Code(s): E, E4, E42, E5, E50, E6, E60

• Why Is Cash (Still) So Entrenched? Insights from the Bank of Canada’s 2009 Methods-of-Payment Survey

  Staff Discussion Paper 2012-2 Carlos Arango, Dylan Hogg, Alyssa Lee

  The authors present key insights from the Bank of Canada’s 2009 Methods-of-Payment survey. In the survey, about 6,800 participants completed a questionnaire with detailed information regarding their personal finances, as well as their use and perceptions of different payment methods.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Financial services JEL Code(s): D, D1, D12, E, E4, E41, L, L8, L81

• An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks

  Staff Working Paper 2012-5 Gregory Bauer, Antonio Diez de los Rios

  We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15

• Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending

  Staff Working Paper 2012-4 Jason Allen, Robert Clark, Jean-François Houde

  This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Interest rates JEL Code(s): G, G2, L, L1

• Fooled by Search: Housing Prices, Turnover and Bubbles

  Staff Working Paper 2012-3 Brian Peterson

  his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Business fluctuations and cycles JEL Code(s): E, E3, R, R2, R21