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We study consumer cash inventory behavior by developing a dynamic model of forward-looking consumers and estimating structural parameters of the model using detailed consumer survey data. Consumers facing holding and withdrawal costs solve a discrete-time continuous-control dynamic programming problem to optimally use cash at the point of sale.

This paper presents a new testing method for the scapegoat model of exchange rates that aims to tighten the link between the theory on scapegoats and its empirical implementation. This new testing method consists of a number of steps.

We examine the impact of the CCyB on foreign lending activities of Canadian banks. We show that the announcement of a tightening in another country’s CCyB leads to a decrease in the growth rate of cross-border lending between Canadian banks and borrowers in that other country.

Financial sector bailouts, while potentially beneficial during a crisis, might lead to excessive risk taking if anticipated. Taking expectations and aggregate risk implications into account, we show that bailouts can be welfare improving, but only if capital adequacy constraints are sufficiently tight.

We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information.

We use Canadian data to examine how monetary policy affects house prices and the consumer price index for rent through exogenous changes in the mortgage interest rates. It finds that the price and rent impacts operate through various channels and that these impacts vary by region.

A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with.

Deputy Governor Lawrence Schembri discusses the factors affecting business investment and the implications for the economic outlook.

This paper studies the testable implication of players’ collusive or cooperative behaviour in a binary choice game with complete information. I illustrate the implementation of this test by revisiting the entry game between Walmart and Kmart.

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.