Liquidation Mechanisms and Price Impacts in DeFi
This paper theoretically and empirically examines the price impacts of liquidations in DeFi and how different liquidation mechanisms affect the price impacts.
D - Microeconomics
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Estimating Discrete Choice Demand Models with Sparse Market-Product Shocks
We propose a novel approach to estimating consumer demand for differentiated products. We eliminate the need for instrumental variables by assuming demand shocks are sparse. Our empirical applications reveal strong evidence of sparsity in real-world datasets. -
The Prudential Toolkit with Shadow Banking
Can regulators keep pace with banks’ creative regulatory workarounds? Our analysis unpacks the trade-offs between fixed regulations and crisis-triggered rules, showing that the latter are especially prone to circumvention—and can trigger larger, costlier bailouts. -
Crisis facilities as a source of public information
During the COVID-19 financial market crisis, central banks introduced programs to support liquidity in important core funding markets. As well as acting as a backstop to market prices, these programs produce useful trading data on prevailing market conditions. When summary information from this data is shared publicly, it can help market participants understand current conditions and aid the recovery of market functioning. -
Markups, Pass-Through, and Firm Heterogeneity with Sequentially Mixed Search
Market power and pass-through of cost and demand shocks are studied in a market with free entry of heterogeneous firms and consumer mixed search. Equilibrium prices and markups are driven by variation in the elasticity of demand across firms. Improved conditions for buyers can either raise or lower market power. -
Anchored Inflation Expectations: What Recent Data Reveal
We analyze micro-level data from the Canadian Survey of Consumer Expectations through the lens of a heterogeneous-expectations model to study how inflation expectations form over the business cycle. We provide new insights into how households form expectations, documenting that forecasting behaviours, attention and noise in beliefs vary across socio-demographic groups and correlate with views about monetary policy. -
Tech Reluctance: Fostering Empathy for Canadians Facing Challenges with Digital Systems
We find that individuals who require help performing banking tasks or who are reluctant to adopt technology avoid digital payment systems they expect to lack usability. Addressing these issues through standard accessibility practices, live assistance and thoughtful interface design can enhance user interaction and trust. -
Using new loan data to better understand mortgage holders
The Bank of Canada is using an enhanced dataset that tracks the stock of outstanding mortgages and home equity lines of credit held by federally regulated lenders. This paper highlights some of the new details in the dataset and how they impact the Bank’s understanding of the mortgage market. -
CBDC in the Market for Payments at the Point of Sale: Equilibrium Impact and Incumbent Responses
We simulate introducing a central bank digital currency (CBDC) and consider consumer adoption, merchant acceptance and usage at the point of sale. Modest adoption frictions significantly inhibit CBDC market penetration along all three dimensions. Incumbent responses to restore pre-CBDC market shares are moderate to small and further reduce the impact of a CBDC. -
Bouncing Back: How Mothballing Curbs Prices
We investigate the macroeconomic impacts of mothballed businesses—those that closed temporarily—on sectoral equilibrium prices after a negative demand shock. Our results suggest that pandemic fiscal support for temporary closures may have eased inflationary pressures.