The Role of Bank Capital in the Propagation of Shocks Staff Working Paper 2008-36 Césaire Meh, Kevin Moran Recent events in financial markets have underlined the importance of analyzing the link between the financial health of banks and real economic activity. This paper contributes to this analysis by constructing a dynamic general equilibrium model in which the balance sheet of banks affects the propagation of shocks. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial institutions, Financial system regulation and policies, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, G, G2, G21
What To Do about Bilateral Credit Limits in the LVTS When a Closure Is Anticipated: Risk versus Liquidity Sharing among LVTS Participants Staff Discussion Paper 2008-13 Sean O'Connor, Greg Caldwell The authors examine the effect of a trade-off between shared credit risk and liquidity efficiency, among participants in Tranche 2 of the Large Value Transfer System (LVTS T2), on their decisions to leave open, or close, their bilateral credit limits (BCLs) to a participant at risk of imminent closure. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial services, Payment clearing and settlement systems JEL Code(s): G, G2, G21, L, L1, L13, L14
Market Structure and the Diffusion of E-Commerce: Evidence from the Retail Banking Industry Staff Working Paper 2008-32 Jason Allen, Robert Clark, Jean-François Houde This paper studies the role that market structure plays in affecting the diffusion of electronic banking. Electronic banking (and electronic commerce more generally) reduces the cost of performing many types of transactions for firms. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Market structure and pricing JEL Code(s): D, D1, D14, D4, G, G2, G21, L, L1
September 15, 2008 The Bank of Canada's Senior Loan Officer Survey Bank of Canada Review - Autumn 2008 Umar Faruqui, Paul Gilbert, Wendy Kei The Bank of Canada maintains regular contact with financial institutions as part of the information-gathering process that feeds into the larger set of information used to arrive at its monetary policy decision. Since 1999, the Bank has been conducting a quarterly survey of the business-lending practices of major Canadian financial institutions. Analysis of the information collected shows that it is correlated with future growth in both credit and business investment. This article focuses on how the survey is conducted and describes the construction of the summary statistics, highlighting the key statistical relationships in the historical survey data. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Monetary and financial indicators, Recent economic and financial developments
Liquidity Efficiency and Distribution in the LVTS: Non-Neutrality of System Changes under Network Asymmetry Staff Discussion Paper 2008-11 Sean O'Connor, James Chapman, Kirby Millar The authors consider the liquidity efficiency of Tranche 2 of the Large Value Transfer System (LVTS T2) by examining, through an empirical analysis, some plausible strategic reactions of individual participants to a systemwide shock to available liquidity in the system. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial services, Payment clearing and settlement systems JEL Code(s): G, G2, G21, L, L1, L13, L14
The Implementation of Monetary Policy in Canada Staff Discussion Paper 2008-9 Walter Engert, Toni Gravelle, Donna Howard The authors present a detailed discussion of the Bank of Canada's framework for the implementation of monetary policy. As background, they provide a brief overview of the financial system in Canada, including a discussion of the financial services industry and the money market. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E5, E52, E58, G, G2, G21
October 15, 2007 The Global Foreign Exchange Market: Growth and Transformation Bank of Canada Review - Autumn 2007 William Barker Barker examines changes in the foreign exchange market, which is in a period of transition. Since the mid-1990s, three closely inter-related and mutually reinforcing factors–electronic trading platforms, a changing mix of market participants, and computer-driven algorithmic trading strategies–have been accelerating market growth and are creating a profound structural transformation. As the balance of market participation shifts between bank and non-bank accounts, large and small participants, and domestic and global players, the market is adopting some of the characteristics of an "exchange" model and is arguably becoming more liquid and operationally efficient. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial institutions, Financial markets
Hedge Funds and Financial Stability: The State of the Debate Staff Discussion Paper 2007-9 Michael R. King, Philipp Maier The authors review the state of the debate on hedge funds and the potential threat that hedge funds pose to financial stability. The collapse of a hedge fund or a group of hedge funds might pose a systemic risk directly by damaging systematically important financial institutions, or indirectly by increasing market volatility and generating a […] Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G15, G18, G2
A Note on Contestability in the Canadian Banking Industry Staff Discussion Paper 2007-7 Jason Allen, Ying Liu The authors examine the degree of contestability in the Canadian banking system using the H-statistic proposed by Panzar and Rosse (1987) and modified by Bikker, Spierdijk, and Finnie (2006). A modification is necessary because the standard approach of controlling for size using total assets leads to an upward bias in the H-statistic. The authors propose […] Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions JEL Code(s): G, G2, G21, L, L1, L11
June 14, 2007 Efficiency and Competition in Canadian Banking Bank of Canada Review - Summer 2007 Jason Allen, Walter Engert Allen and Engert report on recent research at the Bank of Canada on various aspects of efficiency in the Canadian banking industry. This research suggests that, overall, Canadian banks appear to be relatively efficient producers of financial services and they do not exercise monopoly or collusive-oligopoly power. The authors note the value of continuing to investigate opportunities to improve efficiency and competition in financial services in Canada. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial institutions, Financial system regulation and policies