FSRC - Financial System Research Center
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Democratic Political Economy of Financial Regulation
We offer a theory of how inefficiently lax financial regulation could arise in a democratic society. -
Are Bank Bailouts Welfare Improving?
Financial sector bailouts, while potentially beneficial during a crisis, might lead to excessive risk taking if anticipated. Taking expectations and aggregate risk implications into account, we show that bailouts can be welfare improving, but only if capital adequacy constraints are sufficiently tight. -
More Money for Some: The Redistributive Effects of Open Market Operations
I use a search-theoretic model of money to study how open market operations affect the conduct of monetary policy and what this means for households along the wealth distribution. In the model, households vary in the size and composition of their portfolios, which in turn implies that they may be unevenly affected by open market operations. -
Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions
Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario. -
An Optimal Macroprudential Policy Mix for Segmented Credit Markets
How can macroprudential policy and monetary policy stabilize segmented credit markets? Is there a trade-off between financial stability and price stability? I use a theoretical model to evaluate the performance of alternative policies and find the optimal mix of macroprudential and monetary policy in response to aggregate shocks. -
Bank Runs, Bank Competition and Opacity
How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability. -
May 17, 2021
4th Bank of Canada FSRC Macro-Finance Conference
Conference held on May 17 and 18, 2021. -
Optimal Monetary and Macroprudential Policies
Optimal coordination of monetary and macroprudential policies implies higher risk weights on (safe) bonds any time that banks are required to hold additional capital buffers. Coordination also implies a somewhat tighter monetary-policy stance whenever such capital buffers are released. -
Secular Economic Changes and Bond Yields
We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant.