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We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by borrowers.

Worst-case analysis is used among financial regulators in the wake of the recent financial crisis to gauge the tail risk. We provide insight into worst-case analysis and provide guidance on how to estimate it. We derive the bias for the non-parametric heavy-tailed order statistics and contrast it with the semi-parametric extreme value theory (EVT) approach.

How does aggregate profit uncertainty influence investment activity at the firm level? We propose a parsimonious adaptation of a factor-autoregressive conditional heteroscedasticity model to exploit information in a subindustry sales panel for an efficient and tractable estimation of aggregate volatility.

Many empirical studies have examined the cyclical nature of the markup ratio. Until recently, few have attempted to ascertain the changes in the markup over a longer time horizon.

This paper develops a model of settlement system to study the endogenous structure of settlement networks, and the welfare consequences of clearing agent failure. The equilibrium degree of tiering is endogenously determined by the cost structure and the information structure.

Beginning in 1864, in the United States notes of national banks were the predominant medium of exchange. Each national bank issued its own notes. E-money shares many of the characteristics of these bank notes.

Production efficiency and financial stability do not necessarily go hand in hand. With heterogeneity in banks’ abilities to screen borrowers, the market for loans becomes segmented and a self-competition mechanism arises. When heterogeneity increases, the intensive and extensive margins have opposite effects.

Foreign investment flows into Government of Canada (GoC) bonds have surged since the financial crisis. Our empirical analysis suggests that foreign flows of $150 billion lowered the 10-year GoC bond yield by 100 basis points between 2009 and 2012.

The U.S. recovery from the Great Recession has been slow relative to other postwar-era recoveries in the United States. Encouraged by loose lending standards in the pre-crisis period, U.S. households took on unsustainable amounts of debt, making them vulnerable to adverse shocks. Subsequently, a considerable drop in asset prices forced households to repair their balance sheets. While there has been progress in household deleveraging, the government sector now needs to delever, which will restrain growth over the next few years.