Staff working papers

• Transmission of Cyber Risk Through the Canadian Wholesale Payment System

  Staff Working Paper 2022-23 Anneke Kosse, Zhentong Lu

  This paper studies how the impact of a cyber attack that paralyzes one or multiple banks' ability to send payments would transmit to other banks through the Canadian wholesale payment system. Based on historical payment data, we simulate a wide range of scenarios and evaluate the total payment disruption in the system.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C4, C49, E, E4, E42, E47, G, G2, G21

• Nonparametric Identification of Incomplete Information Discrete Games with Non-equilibrium Behaviors

  Staff Working Paper 2022-22 Erhao Xie

  This paper jointly relaxes two assumptions in the literature that estimates games. These two assumptions are the parametric restriction on the model primitives and the restriction of equilibrium behaviors. Without imposing the above two assumptions, this paper identifies the primitives of the game.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C57

• Expectation-Driven Term Structure of Equity and Bond Yields

  Staff Working Paper 2022-21 Ming Zeng, Guihai Zhao

  Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield spreads).

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G0, G00, G1, G12

• More Than Words: Fed Chairs’ Communication During Congressional Testimonies

  Staff Working Paper 2022-20 Michelle Alexopoulos, Xinfen Han, Oleksiy Kryvtsov, Xu Zhang

  We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Increases in the Chair’s text-, voice-, or face-emotion indices during these testimonies generally raise stock prices and lower their volatility.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Financial markets, Monetary policy communications JEL Code(s): E, E5, E52, E58, E7, E71

• Asymmetric Systemic Risk

  Staff Working Paper 2022-19 Radoslav Raykov, Consuelo Silva-Buston

  Bank regulation presumes risks spill over more easily from large banks to the banking system than vice versa. Interestingly, we observe this is not the case. We find that the capacity to transmit risk is larger in the system-to-bank direction, leading to an increased default risk.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G10, G2, G20

• Exports and the Exchange Rate: A General Equilibrium Perspective

  Staff Working Paper 2022-18 Patrick Alexander, Abeer Reza

  How do a country’s exports change when its currency depreciates? Does it matter which forces drive the exchange rate deprecation in the first place? We find that this relationship varies greatly depending on what drives exchange rate movements, and we conclude that the direct relationship between the exchange rate and exports is weak for Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Business fluctuations and cycles, Exchange rate regimes, Exchange rates, International topics, Monetary policy transmission, Trade integration JEL Code(s): F, F3, F31, F32, F33, F4, F41

• What COVID-19 May Leave Behind: Technology-Related Job Postings in Canada

  Staff Working Paper 2022-17 Alejandra Bellatin, Gabriela Galassi

  COVID-19 affects technology adoption: online job postings for technology-related occupations fall less during pandemic lockdowns and pick up faster during reopenings than postings for more traditional occupations.

  Content Type(s): Staff research, Staff working papers Topic(s): Coronavirus disease (COVID-19), Econometric and statistical methods, Labour markets JEL Code(s): J, J2, J23, J24, O, O1, O14

• Addictive Platforms

  Staff Working Paper 2022-16 Shota Ichihashi, Byung-Cheol Kim

  We study competition for consumer attention, in which platforms can sacrifice service quality for attention. A platform can choose the “addictiveness” of its service.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models JEL Code(s): D, D4, D40, L, L5, L51

• Equilibrium in Two-Sided Markets for Payments: Consumer Awareness and the Welfare Cost of the Interchange Fee

  Staff Working Paper 2022-15 Kim Huynh, Gradon Nicholls, Oleksandr Shcherbakov

  We construct and estimate a structural two-stage model of equilibrium in a market for payments in order to quantify the network externalities and identify the main determinants of consumer and merchant decisions.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial services JEL Code(s): C, C5, C51, D, D1, D12, E, E4, E42, L, L1, L14

• Job Ladder and Business Cycles

  Staff Working Paper 2022-14 Felipe Alves

  During downturns, workers get stuck in low-productivity jobs and wages remain stagnant. I build an heterogenous agent incomplete market model with a full job ladder that accounts for these facts. An adverse financial shock calibrated to the US Great Recession replicates the period’s slow recovery and missing disinflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Inflation and prices, Labour markets, Productivity JEL Code(s): D, D3, D31, D5, D52, E, E2, E21, E24, E3, E31, E32