February 17, 2011 Adverse Selection and Financial Crises Bank of Canada Review - Winter 2010-2011 Koralai Kirabaeva The recent financial crisis has highlighted the importance of adverse selection as a contributing factor to financial market instability. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial stability, Financial system regulation and policies, Market structure and pricing
February 17, 2011 Conference Summary: Financial Globalization and Financial Instability Bank of Canada Review - Winter 2010-2011 Scott Hendry The Bank of Canada’s annual conference, held in October 2010, brought together leading researchers from universities and central banks around the world. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Central bank research, Financial markets, Financial stability, Financial system regulation and policies
Leverage, Balance Sheet Size and Wholesale Funding Staff Working Paper 2010-39 H. Evren Damar, Césaire Meh, Yaz Terajima Some evidence points to the procyclicality of leverage among financial institutions leading to aggregate volatility. This procyclicality occurs when financial institutions finance their assets with non-equity funding (i.e., debt financed asset expansions). Wholesale funding is an important source of market-based funding that allows some institutions to quickly adjust their leverage. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): G, G2, G21, G28
The Impact of Liquidity on Bank Profitability Staff Working Paper 2010-38 Étienne Bordeleau, Christopher Graham The recent crisis has underlined the importance of sound bank liquidity management. In response, regulators are devising new liquidity standards with the aim of making the financial system more stable and resilient. In this paper, the authors analyse the impact of liquid asset holdings on bank profitability for a sample of large U.S. and Canadian banks. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G21, G3, G32, G33
November 18, 2010 Trends in Issuance: Underlying Factors and Implications Bank of Canada Review - Autumn 2010 Jonathan Witmer Trends in debt issuance have changed significantly over the past decade, both prior to the financial crisis and subsequently. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial markets, Financial system regulation and policies
Understanding Systemic Risk: The Trade-Offs between Capital, Short-Term Funding and Liquid Asset Holdings Staff Working Paper 2010-29 Céline Gauthier, Zhongfang He, Moez Souissi We offer a multi-period systemic risk assessment framework with which to assess recent liquidity and capital regulatory requirement proposals in a holistic way. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): C, C1, C15, C8, C81, E, E4, E44, G, G0, G01, G2, G21
Central Bank Haircut Policy Staff Working Paper 2010-23 James Chapman, Jonathan Chiu, Miguel Molico We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Financial services, Financial system regulation and policies, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E4, E40, E5, E50
Liquidity Transformation and Bank Capital Requirements Staff Working Paper 2010-22 Hajime Tomura This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): D, D8, D82, E, E4, E44, G, G2, G21
August 19, 2010 Should Monetary Policy Be Used to Counteract Financial Imbalances? Bank of Canada Review - Summer 2010 Jean Boivin, Césaire Meh, Timothy Lane The authors examine whether monetary policy should and could do more to lean against financial imbalances (such as those associated with asset-price bubbles or unsustainable credit expansion) as they are building up, or whether its role should be limited to cleaning up the economic consequences as the imbalances unwind. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial system regulation and policies, Monetary policy framework
Identifying Asymmetric Comovements of International Stock Market Returns Staff Working Paper 2010-21 Fuchun Li Based on a new approach for measuring the comovements between stock market returns, we provide a nonparametric test for asymmetric comovements in the sense that stock market downturns will lead to stronger comovements than market upturns. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, International topics JEL Code(s): C, C4, C49, F, F2, F21, G, G1, G15, G19