Bio

Josef Schroth is a Research Advisor in the Financial Stability Department at the Bank of Canada. He works in the areas of macroeconomics and accounting. Specific topics include financial market regulation and disclosure choice. Josef Schroth received his PhD in economics from UCLA.

Research Field(s): Banking Financial Economics Macroeconomic Theory

Staff analytical notes

Can regulating bank capital help prevent and mitigate financial downturns?

Staff Analytical Note 2021-12 Alejandro García, Josef Schroth
Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada
Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

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Staff working papers

Should Banks Be Worried About Dividend Restrictions?

Staff Working Paper 2023-49 Josef Schroth
A regulator would want to restrict dividends to force banks to rebuild capital during a crisis. But such a policy is not time-consistent. A time-consistent policy would let banks gradually rebuild capital and pay dividends even when their equity remains below pre-crisis levels.
Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

Optimal Monetary and Macroprudential Policies

Staff Working Paper 2021-21 Josef Schroth
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.
Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Inflation targets, Monetary policy JEL Code(s): E, E4, E44, E6, E60, G, G2, G21, G28

Outside Investor Access to Top Management: Market Monitoring versus Stock Price Manipulation

Staff Working Paper 2020-43 Josef Schroth
Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.
Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Recent economic and financial developments JEL Code(s): D, D8, D82, D86, G, G1, G14, G3, G32, G34, M, M1, M12, M4, M41

Macroprudential Policy with Capital Buffers

Staff Working Paper 2019-8 Josef Schroth
The countercyclical capital buffer is part of Basel III, the set of regulatory measures developed in response to the financial crisis of 2007–09. This study focuses on how time-varying capital buffers can address inefficiencies in economies with endogenous financial crises.
Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

Optimal Capital Regulation

Staff Working Paper 2017-6 Stéphane Moyen, Josef Schroth
We study constrained-efficient bank capital regulation in a model with market-imposed equity requirements. Banks hold equity buffers to insure against sudden loss of access to funding. However, in the model, banks choose to only partially self-insure because equity is privately costly.
Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): E, E1, E13, E3, E32, E4, E44

Capital Flows to Developing Countries: Is There an Allocation Puzzle?

Staff Working Paper 2016-53 Josef Schroth
Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects.
Content Type(s): Staff research, Staff working papers Topic(s): Foreign reserves management, Interest rates, International financial markets JEL Code(s): E, E1, E13, E2, E21, F, F4, F43

Supervising Financial Regulators

Staff Working Paper 2016-52 Josef Schroth
How much discretion should local financial regulators in a banking union have in accommodating local credit demand? I analyze this question in an economy where local regulators privately observe expected output from high lending. They do not fully internalize default costs from high lending since deposit insurance cannot be priced fairly.
Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Regional economic developments JEL Code(s): E, E4, E44, G, G2, G28, H, H7

Financial Crisis Interventions

Staff Working Paper 2016-29 Josef Schroth
This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital.
Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44

Risk Sharing in the Presence of a Public Good

Staff Working Paper 2015-27 Josef Schroth
This paper studies an economy where agents can spend resources on consuming a private good and on funding a public good. There is asymmetric information regarding agents’ relative preference for private versus public good consumption.
Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Financial system regulation and policies, Fiscal policy JEL Code(s): D, D8, D82, D86, E, E6, E62, H, H2, H21, H23, H7, H77

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Journal publications

Refereed journals

  • “Capital flows and growth across developing countries.”
    Journal of International Money and Finance, vol. 137, article no. 102904 (2023).
  • “Macroprudential Policy with Capital Buffers.”
    Journal of Monetary Economics, vol. 118, p. 296-311 (2021).
  • “On the Distributional Effects of Bank Bailouts.”
    Review of Economic Dynamics , vol. 40, p. 252-277 (2021).
  • “Managerial Compensation and Stock Price Manipulation.”
    Journal of Accounting Research, vol. 56, no. 5, p. 1335-1381 (2018).
  • “Optimal Intermediary Rents.”
    American Economic Journal: Macroeconomics, vol. 8, no. 1, p. 98-118 (2016).