D8 - Information, Knowledge, and Uncertainty
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Update on housing market imbalances and household indebtedness
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified. -
Stablecoin Assessment Framework
We offer relevant authorities a three-step assessment framework they can use to understand, identify and quantify the risks associated with stablecoin and other cryptocurrency arrangements. -
How Long is Forever in the Laboratory? Three Implementations of an Infinite-Horizon Monetary Economy
Standard monetary models adopt an infinite horizon with discounting. Testing these models in the lab requires implementing this horizon within a limited time frame. We compare three approaches to such an implementation and discuss their relative advantages. -
Estimating Policy Functions in Payments Systems Using Reinforcement Learning
We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information. -
Strategic Uncertainty in Financial Markets: Evidence from a Consensus Pricing Service
We look at the informational content of consensus pricing in opaque over-the-counter markets. We show that the availability of price data informs participants mainly about other participants’ valuations, rather than about the value of a financial security. -
The Determinants of Consumers’ Inflation Expectations: Evidence from the US and Canada
We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations. -
Outside Investor Access to Top Management: Market Monitoring versus Stock Price Manipulation
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. -
Forward Guidance and Expectation Formation: A Narrative Approach
How exactly does forward guidance influence interest rate expectations? -
Ten Isn’t Large! Group Size and Coordination in a Large-Scale Experiment
Economic activities typically involve coordination among a large number of agents. These agents have to anticipate what other agents think before making their own decisions.