Are Bank Bailouts Welfare Improving? Staff Working Paper 2021-56 Malik Shukayev, Alexander Ueberfeldt 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. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01
On Causal Networks of Financial Firms: Structural Identification via Non-parametric Heteroskedasticity Staff Working Paper 2020-42 Ruben Hipp Banks’ business interactions create a network of relationships that are hidden in the correlations of bank stock returns. But for policy interventions, we need causality to understand how the network changes. Thus, this paper looks for the causal network anticipated by investors. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets, Financial stability JEL Code(s): C, C1, C3, C32, C5, C58, L, L1, L14
Identification and Estimation of Risk Aversion in First-Price Auctions with Unobserved Auction Heterogeneity Staff Working Paper 2016-23 Serafin Grundl, Yu Zhu This paper shows point identification in first-price auction models with risk aversion and unobserved auction heterogeneity by exploiting multiple bids from each auction and variation in the number of bidders. The required exclusion restriction is shown to be consistent with a large class of entry models. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C14, C5, C57, D, D4, D44, L, L0, L00
Payment Coordination and Liquidity Efficiency in the New Canadian Wholesale Payments System Staff Discussion Paper 2022-3 Francisco Rivadeneyra, Nellie Zhang We study the impact of the Bank of Canada’s choice of settlement mechanism in Lynx on participant behaviors, liquidity usage, payment delays and the overall operational efficiency of the new system. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Payment clearing and settlement systems JEL Code(s): C, C5, E, E4, E42, E5, E58
Bank Runs, Portfolio Choice, and Liquidity Provision Staff Working Paper 2019-37 Toni Ahnert, Mahmoud Elamin After the financial crisis of 2007–09, many jurisdictions introduced new banking regulations to make banks more resilient and less likely to fail. These regulations included tighter limits for the quality and quantity of bank capital and introduced minimum standards for liquidity. But what was the impact of these changes? Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Wholesale funding JEL Code(s): G, G0, G01, G2, G21
Assessing and Valuing the Non-Linear Structure of Hedge Fund Returns Staff Working Paper 2006-31 Antonio Diez de los Rios, René Garcia Several studies have put forward the non-linear structure and option-like features of returns associated with hedge fund strategies. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial institutions JEL Code(s): C, C1, C5, G, G1
Unintended Consequences of the Home Affordable Refinance Program Staff Working Paper 2024-11 Phoebe Tian, Chen Zheng We investigate the unintended consequences of the Home Affordable Refinance Program (HARP). Originally designed to help borrowers refinance after the 2008–09 global financial crisis, HARP inadvertently strengthened the market power of incumbent lenders by creating a cost advantage for them. Despite a 2013 policy rectifying this cost advantage, we still find significant welfare losses for borrowers. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions JEL Code(s): G, G2, G21, G5, G51, L, L5, L51
Short-Run and Long-Run News: Evidence from Giant Commodity Discoveries Staff Working Paper 2025-24 Jean-Paul L’Huillier, Kirill Shakhnov, Laure Simon Our understanding of news shocks is, to a large extent, based on studies that focus empirically on short-run news. This paper brings new insights by analyzing the effects of giant commodity discoveries, which typically materialize over the longer run. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, International topics JEL Code(s): E, E2, E23, F, F3, F4, Q, Q3, Q33
Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts Staff Working Paper 2018-52 Julien Champagne, Guillaume Poulin-Bellisle, Rodrigo Sekkel We present a novel database of real-time data and forecasts from the Bank of Canada’s staff economic projections. We then provide a forecast evaluation for GDP growth and CPI inflation since 1982: we compare the staff forecasts with those from commonly used time-series models estimated with real-time data and with forecasts from other professional forecasters and provide standard bias tests. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Economic models, Inflation targets, Monetary policy JEL Code(s): C, C3, C32, E, E1, E17, E3, E37
Composite Likelihood Estimation of an Autoregressive Panel Probit Model with Random Effects Staff Working Paper 2019-16 Kerem Tuzcuoglu Modeling and estimating persistent discrete data can be challenging. In this paper, we use an autoregressive panel probit model where the autocorrelation in the discrete variable is driven by the autocorrelation in the latent variable. In such a non-linear model, the autocorrelation in an unobserved variable results in an intractable likelihood containing high-dimensional integrals. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit risk management, Econometric and statistical methods, Economic models JEL Code(s): C, C2, C23, C25, C5, C58, G, G2, G24