L - Industrial Organization

• No Double Standards: Quantifying the Impact of Standard Harmonization on Trade

  Staff Working Paper 2019-36 Julia Schmidt, Walter Steingress

  Product standards are omnipresent in industrialized societies. Though standardization can be beneficial for domestic producers, divergent product standards have been categorized as a major obstacle to international trade. This paper quantifies the effect of standard harmonization on trade flows and characterizes the extent to which it changes the cost and demand structure of exporting.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): F, F1, F13, F14, F15, L, L1, L15

• The Simple Economics of Global Fuel Consumption

  Staff Working Paper 2019-35 Doga Bilgin, Reinhard Ellwanger

  This paper presents a structural framework of the global oil market that relies on information on global fuel consumption to identify flow demand for oil. We show that under mild identifying assumptions, data on global fuel consumption help to provide comparatively sharp insights on elasticities and other key structural parameters of the global oil market.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models JEL Code(s): C, C5, C51, L, L7, L71, Q, Q4, Q41, Q43

• Exchange Rates, Retailers, and Importing: Theory and Firm-Level Evidence

  Staff Working Paper 2019-34 Alex Chernoff, Patrick Alexander

  We develop a model with firm heterogeneity in importing and cross-border shopping among consumers. Exchange-rate appreciations lower the cost of imported goods, but also lead to more cross-border shopping; hence, the net impact on aggregate retail prices and sales is ambiguous.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, International topics, Service sector JEL Code(s): F, F1, F10, F14, L, L8, L81

• Explaining the Interplay Between Merchant Acceptance and Consumer Adoption in Two-Sided Markets for Payment Methods

  Staff Working Paper 2019-32 Kim Huynh, Gradon Nicholls, Oleksandr Shcherbakov

  Recent consumer and merchant surveys show a decrease in the use of cash at the point of sale. Increasingly, consumers and merchants have access to a growing array of payment innovations as substitutes for cash.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial services JEL Code(s): C, C5, C51, L, L1, L13, L15, L8, L81, L9, L96

• Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation

  Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel

  Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, G21, G28, L, L5, L51

• Inference in Games Without Nash Equilibrium: An Application to Restaurants’ Competition in Opening Hours

  Staff Working Paper 2018-60 Erhao Xie

  This paper relaxes the Bayesian Nash equilibrium (BNE) assumption commonly imposed in empirical discrete choice games with incomplete information. Instead of assuming that players have unbiased/correct expectations, my model treats a player’s belief about the behavior of other players as an unrestricted unknown function. I study the joint identification of belief and payoff functions.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Market structure and pricing JEL Code(s): C, C5, C57, L, L1, L13, L8, L85

• The Scale and Scope of Online Retail

  Staff Analytical Note 2018-19 Alex Chernoff

  This paper studies the growth of online retail over the period 1999–2012, using confidential firm-product-level data for Canada. The revenue of online retailers is decomposed into the contributions of product scope (the number of product categories) and product scale (average revenue per product category).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Firm dynamics, International topics JEL Code(s): D, D2, D22, L, L1, L11, L8, L81

• Customer Liquidity Provision in Canadian Bond Markets

  Staff Analytical Note 2018-12 Corey Garriott, Jesse Johal

  This analytical note assesses the prevalence of liquidity provision by institutional investors in Canadian bonds. We find that the practice is not prevalent in Canada. Customer liquidity provision is more prevalent for less liquid bonds, on days when liquidity is already expensive or when there are larger trading volumes. In our interpretation, Canadian dealers draw on customer liquidity as a supplementary source of liquidity and only when necessary, given its cost.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing, Recent economic and financial developments JEL Code(s): G, G1, G14, G2, G20, L, L1

• High-Frequency Trading and Institutional Trading Costs

  Staff Working Paper 2018-8 Marie Chen, Corey Garriott

  Using data on Canadian bond futures, we examine how high-frequency traders (HFTs) interact with institutions building large positions. In contrast to recent findings, we find HFTs in the data act as small-sized liquidity suppliers, and we reject the hypothesis that they engage in back running, a predatory trading strategy.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G14, G2, G20, L, L1, L10

• What Drives Episodes of Settlement Fails in the Government of Canada Bond Market?

  Staff Working Paper 2017-54 Jean-Sébastien Fontaine, James Pinnington, Adrian Walton

  We study settlement fails for trades in the Government of Canada bond market. We find that settlement fails do not occur independently. Using a novel and comprehensive dataset, we examine three drivers of fails.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing, Payment clearing and settlement systems JEL Code(s): E, E4, G, G1, G2, G21, L, L1