G28 - Government Policy and Regulation
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Credit Card Minimum Payment Restrictions
We study a government policy that restricts repayment choices with the aim of reducing credit card debt and estimate its effects by applying a difference-in-differences methodology to comprehensive credit-reporting data about Canadian consumers. We find the policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency. -
Assessing the Impact of the Bank of Canada’s Government Bond Purchases
In March 2020, the Bank of Canada implemented the Government of Canada Bond Purchase Program, eventually purchasing approximately $340 billion of government bonds. In this paper, we analyze the impact of this program on financial market prices and yields as well as on GDP and inflation. -
Financial Intermediation and Fire Sales with Liquidity Risk Pricing
We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. Viewed through the lens of the model, the liquidity requirements proposed by the U. S. Securities and Exchange Commission for these intermediaries could hurt the economy. -
CBDC: Banking and Anonymity
We examine the optimal amount of user anonymity in a central bank digital currency in the context of bank lending. Anonymity, defined as the lender’s inability to discern an entrepreneur’s actions that enable fund diversion, influences the choice of payment instrument due to its impact on a bank’s lending decisions. -
Procyclicality in Central Counterparty Margin Models: A Conceptual Tool Kit and the Key Parameters
Regulators need to provide effective procyclicality guidance, and central counterparties must design and calibrate their margin systems and procyclicality frameworks appropriately. To serve these needs, we provide a novel conceptual tool kit. Further, we highlight that the focus should be on the key margin system parameters in determining procyclicality. -
Estimating the Appropriate Quantity of Settlement Balances in a Floor System
This paper presents two complementary approaches to estimating the appropriate quantity of settlement balances needed to effectively operate monetary policy under a floor system in Canada. -
Three things we learned about the Lynx payment system
Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently. -
From LVTS to Lynx: Quantitative Assessment of Payment System Transition
We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays. -
Exporting and Investment Under Credit Constraints
We examine the relationship between firms’ performance and credit constraints affecting export market entry. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets.