G18 - Government Policy and Regulation
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Intermediary Market Power and Capital Constraints
We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups. -
Stress Relief? Funding Structures and Resilience to the Covid Shock
Funding structures affected the amount of financial stress different countries and sectors experienced during the spread of COVID-19 in early 2020. Policy responses targeting specific vulnerabilities were more effective at mitigating this stress than those supporting banks or the economy more broadly. -
Cyber Risk and Security Investment
We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients’ vulnerability to cyber attacks and about the fees charged. -
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. -
Consumer Credit with Over-optimistic Borrowers
When lenders cannot directly identify behavioural and rational borrowers, they use type scoring to track the likelihood of a borrower’s type. This leads to the partial pooling of borrowers, which results in rational borrowers subsidizing borrowing costs for behavioural borrowers. This, in turn, reduces the effectiveness of regulatory policies that target mistakes by behavioural borrowers. -
Monetary Policy Independence and the Strength of the Global Financial Cycle
We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation. -
Trading for Bailouts
In times of high uncertainty, governments often implement interventions such as bailouts to financial institutions. To use public resources efficiently and to avoid major spillovers to the rest of the economy, policy-makers try to identify which institutions should receive assistance. -
Canadian Securities Lending Market Ecology
This is the fourth of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The paper discusses the organization of the securities lending market in Canada. We outline key characteristics of securities lending contracts, participants in the securities lending market, the market infrastructures that support securities lending activities, and aggregated statistics describing the Canadian market. -
Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches
In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.