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
November 19, 2019 Researching the Economic Impacts of Climate Change Miguel Molico The Bank of Canada has a mandate to “promote the economic and financial welfare of Canada,” primarily through the conduct of monetary policy and promotion of a safe, sound and efficient financial system. Understanding the macroeconomic and financial system impacts of climate change and the transition to a low-carbon economy is therefore a priority for the Bank. Content Type(s): Staff research, Other Research Topic(s): Climate change
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
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
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
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
Testing the Parametric Specification of the Diffusion Function in a Diffusion Process Staff Working Paper 2005-35 Fuchun Li A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Interest rates JEL Code(s): C, C1, C12, C14
Job Applications and Labour Market Flows Staff Working Paper 2021-49 Serdar Birinci, Kurt See, Shu Lin Wee Although the number of job applications has risen, job-finding rates remain relatively unchanged while job-separation rates have significantly declined. Rather than raising the probability of finding a job, we find that a rise in applications raises the probability of finding a good match, as evidenced by the decline in separation rates. Content Type(s): Staff research, Staff working papers Research Topic(s): Labour markets, Productivity JEL Code(s): E, E2, E24, J, J6, J63, J64
Simulating Intraday Transactions in the Canadian Retail Batch System Staff Working Paper 2023-1 Nellie Zhang This paper proposes a unique approach to simulate intraday transactions in the Canadian retail payments batch system when such transactions are unobtainable. The simulation procedure has potential for helping with data-deficient problems where only high-level aggregate information is available. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Payment clearing and settlement systems JEL Code(s): C, C6, C63, E, E4, E42, E5, E58