A Wake-Up-Call Theory of Contagion Staff Working Paper 2015-14 Christoph Bertsch, Toni Ahnert We propose a novel theory of financial contagion. We study global coordination games of regime change in two regions with an initially uncertain correlation of regional fundamentals. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial stability, International financial markets JEL Code(s): D, D8, D82, F, F3, G, G0, G01
March 26, 2015 Central Bank Credibility and Policy Normalization Remarks Stephen S. Poloz Canada-United Kingdom Chamber of Commerce London, United Kingdom Governor Poloz discusses the recent rise in financial market volatility and low long-term borrowing costs, and what they both mean for central bank credibility. Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Credibility, Financial stability, Inflation targets, Interest rates, Monetary policy, Monetary policy implementation
Effects of Funding Portfolios on the Credit Supply of Canadian Banks Staff Working Paper 2015-10 H. Evren Damar, Césaire Meh, Yaz Terajima This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies, Monetary policy implementation JEL Code(s): E, E5, E52, G, G2, G21
Securitization under Asymmetric Information over the Business Cycle Staff Working Paper 2015-9 Martin Kuncl This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E3, E32, E4, E44, G, G0, G01, G2, G20
Motivations for Capital Controls and Their Effectiveness Staff Working Paper 2015-5 Radhika Pandey, Gurnain Pasricha, Ila Patnaik, Ajay Shah We assess the motivations for changing capital controls and their effectiveness in India, a country with extensive and long-standing controls. We focus on the controls on foreign borrowing that can, in principle, be motivated by macroprudential concerns. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, Financial stability, Financial system regulation and policies, International topics JEL Code(s): F, F3, F32, G, G1, G15, G18
Immigrants and Mortgage Delinquency in the United States Staff Working Paper 2015-1 Zhenguo Lin, Yingchun Liu, Jia Xie We investigate the relationship between immigrant status and mortgage delinquency in the United States. Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Financial stability JEL Code(s): G, G2, G21, J, J1, J15
December 10, 2014 Exchange-Traded Funds: Evolution of Benefits, Vulnerabilities and Risks Financial System Review - December 2014 Ian Foucher, Kyle Gray Ian Foucher and Kyle Gray explain the different types of exchange-traded funds (ETFs), which present both benefits and risks for investors. They discuss ways in which the risk characteristics of certain ETF products could have broader implications for the financial system, and describe the evolution of ETF market structure and regulation in different jurisdictions as authorities try to mitigate risks related to ETFs. Content Type(s): Publications, Financial System Review articles Topic(s): Financial markets, Financial stability, Market structure and pricing JEL Code(s): G, G1, G14, G18, G2, G20
December 10, 2014 Cyber Security: Protecting the Resilience of Canada’s Financial System Financial System Review - December 2014 Harold Gallagher, Wade McMahon, Ron Morrow Harold Gallagher, Wade McMahon and Ron Morrow examine the various sources of cyber attacks and their potential for systemic risk. Against this background, the report highlights efforts being made to protect against cyber-security threats, including individual and collective actions by financial institutions and financial market infrastructures, as well as initiatives by international organizations, regulatory authorities and governments. The authors then describe the coordination, under the Joint Operational Resilience Management program, of private and public sector actions in Canada for managing and testing capabilities during severe operational events such as cyber attacks. Content Type(s): Publications, Financial System Review articles Topic(s): Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): G, G2, G20, G23, G28
Integrating Uncertainty and Monetary Policy-Making: A Practitioner’s Perspective Staff Discussion Paper 2014-6 Stephen S. Poloz This paper discusses how central banking is evolving in light of recent experience, with particular emphasis on the incorporation of uncertainty into policy decision-making. Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Financial stability, Monetary policy and uncertainty, Monetary policy communications, Monetary policy framework JEL Code(s): C, C5, C50, E, E3, E37, E5, E6, E61
Predicting Financial Stress Events: A Signal Extraction Approach Staff Working Paper 2014-37 Ian Christensen, Fuchun Li The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C14, C4, E, E3, E37, E4, E47, F, F3, F36, F37, G, G0, G01, G1, G17