Modelling Financial Instability: A Survey of the Literature Staff Working Paper 2002-12 Alexandra Lai The magnitude and frequency of recent financial crises underscore the importance of understanding financial instability for the purpose of crisis prevention and crisis management. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Financial services JEL Code(s): G, G2, G20, G21, G28
Monetary Policy Tradeoffs Between Financial Stability and Price Stability Staff Working Paper 2016-49 Malik Shukayev, Alexander Ueberfeldt We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01
Markups, Pass-Through, and Firm Heterogeneity with Sequentially Mixed Search Staff Working Paper 2025-7 Alex Chernoff, Allen Head, Beverly Lapham Market power and pass-through of cost and demand shocks are studied in a market with free entry of heterogeneous firms and consumer mixed search. Equilibrium prices and markups are driven by variation in the elasticity of demand across firms. Improved conditions for buyers can either raise or lower market power. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Service sector JEL Code(s): D, D2, D21, D4, D43, E, E3, E31, L, L1, L11
Filling in the Blanks: Network Structure and Interbank Contagion Staff Working Paper 2014-26 Kartik Anand, Ben Craig, Goetz von Peter The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial institutions, Financial stability JEL Code(s): C, C6, C63, D, D8, D85, G, G2, G21, L, L1, L14
Testing Uncovered Interest Parity: A Continuous-Time Approach Staff Working Paper 2007-53 Antonio Diez de los Rios, Enrique Sentana Nowadays researchers can choose the sampling frequency of exchange rates and interest rates. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): F, F3, F31, G, G1, G15
Real and Nominal Frictions within the Firm: How Lumpy Investment Matters for Price Adjustment Staff Working Paper 2009-36 Michael K. Johnston Real rigidities are an important feature of modern sticky price models and are policy-relevant because of their welfare consequences, but cannot be structurally identified from time series. I evaluate the plausibility of capital specificity as a source of real rigidities using a two-dimensional generalized (s,S) model calibrated to micro evidence. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy transmission JEL Code(s): E, E1, E12, E2, E22, E3, E31
The Macroeconomic Effects of Debt Relief Policies During Recessions Staff Working Paper 2023-48 Soyoung Lee A large-scale reduction in mortgage principal can strengthen a recovery, support house prices and lower foreclosures. The nature of the intervention shapes its impact, which rests on how resources are redistributed across households. The availability of bankruptcy on unsecured debt changes the response to large-scale mortgage relief by reducing precautionary savings. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Debt management, Housing JEL Code(s): E, E2, E21, E3, E32, E6
Uninsurable Investment Risks Staff Working Paper 2004-29 Césaire Meh, Vincenzo Quadrini The authors study a general-equilibrium economy in which agents have the ability to invest in a risky technology. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial institutions, Financial markets JEL Code(s): D, D3, D31, E, E2, E21, G, G0
Intermediary Market Power and Capital Constraints Staff Working Paper 2023-51 Jason Allen, Milena Wittwer We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Market structure and pricing JEL Code(s): D, D4, D40, D44, G, G1, G12, G18, G2, G20, L, L1, L10
What has been putting upward pressure on CORRA? Staff Analytical Note 2024-4 Boran Plong, Neil Maru From the autumn of 2023 into early 2024, the Canadian Overnight Repo Rate Average (CORRA), a measure of the cost of overnight general collateral Canadian dollar repos, was consistently well above the Bank’s target for the overnight rate. We find that, among several factors, long bond positions that require repo financing are the main driver of the recent upward pressure on CORRA. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, Interest rates, Lender of last resort, Monetary policy implementation JEL Code(s): D, D4, D5, D53, E, E4, E43, E44, E5, E52, G, G1, G12