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Derivatives exchanges often determine collateral requirements, which are fundamental to market safety, with dated risk models assuming normal returns. However, derivatives returns are heavy-tailed, which leads to the systematic under-collection of collateral (margin). This paper uses extreme value theory (EVT) to evaluate the cost of this margin inadequacy to market participants in the event of default.

The premium on “on-the-run” Treasuries is an anomaly. I explain it using a model in which primary dealers hold inventories of Treasuries. I use the model to analyze the effects of granting access to central bank facilities.

Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle.

This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.

We analyze factors that may explain consistent answers to questions about inflation expectations in the Canadian Survey of Consumer Expectations. We also compare the inflation forecasts of consumers with consistent responses with those of professional forecasters.

As the title of the conference suggests, we have seen many boom-and-bust cycles in the commodity sector. This raises one obvious and central question: How can we avoid them in the future?

We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.

Declining labour market dynamism of workers results in an increasing wedge between their earnings and their marginal product as they age. This wedge and the demographic shift in the earnings shares of older workers can account for 59% of the decline in labor’s share of earnings in the United States.

Consumers, businesses and banks make millions of payments each day using a variety of instruments, such as debit cards, cheques and wires. Canada is currently developing three new systems to process these transactions: Lynx, Settlement Optimization Engine (SOE) and Real-Time Rail (RTR).

Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations.