On the Nexus of Monetary Policy and Financial Stability: Is the Financial System More Resilient? Staff Discussion Paper 2016-12 Patricia Palhau Mora, Michael Januska Monetary policy and financial stability are closely intertwined, and the resilience of the financial system carries weight in this relationship. This paper explores whether the financial system is more resilient as a result of the G20’s post-crisis agenda for financial regulatory reform. Content Type(s): Staff research, Staff discussion papers Topic(s): Financial stability, Financial system regulation and policies, Monetary policy framework JEL Code(s): E, E5, E52, G, G0, G01, G2, G21, G23, G28
The Impact of Bankruptcy Reform on Insolvency Choice and Consumer Credit Staff Working Paper 2016-26 Jason Allen, Kiana Basiri We examine the impact of the 2009 amendments to the Canadian Bankruptcy and Insolvency Act on insolvency decisions. Rule changes steered debtors out of division I proposals and into the more cost-effective division II proposals. Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, K, K3, K35
On the Nexus of Monetary Policy and Financial Stability: Effectiveness of Macroprudential Tools in Building Resilience and Mitigating Financial Imbalances Staff Discussion Paper 2016-11 H. Evren Damar, Miguel Molico This paper reviews the Canadian and international evidence of the effectiveness of macroprudential policy measures in building resilience and mitigating financial imbalances. The analysis concludes that these measures have broadly achieved their goal of increasing the overall resilience of the financial system to the buildup of imbalances and increasing the financial system’s ability to withstand adverse shocks. Content Type(s): Staff research, Staff discussion papers Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies JEL Code(s): E, E5, E51, E58, G, G1, G18, G2, G28
Estimating Systematic Risk Under Extremely Adverse Market Conditions Staff Working Paper 2016-22 Maarten van Oordt, Chen Zhou This paper considers the problem of estimating a linear model between two heavy-tailed variables if the explanatory variable has an extremely low (or high) value. We propose an estimator for the model coefficient by exploiting the tail dependence between the two variables and prove its asymptotic properties. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C14, G, G0, G01
Early Warning of Financial Stress Events: A Credit-Regime-Switching Approach Staff Working Paper 2016-21 Fuchun Li, Hongyu Xiao We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C12, C14, G, G0, G01, G1, G17
Retail Order Flow Segmentation Staff Working Paper 2016-20 Corey Garriott, Adrian Walton In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G14, G2, G20, L, L1, L10
What to Expect When China Liberalizes Its Capital Account Staff Discussion Paper 2016-10 Mark Kruger, Gurnain Pasricha When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance. Content Type(s): Staff research, Staff discussion papers Topic(s): Balance of payments and components, Exchange rate regimes, International topics JEL Code(s): F, F3, F31, F32, G, G1, G18
Should Monetary Policy Lean Against Housing Market Booms? Staff Working Paper 2016-19 Sami Alpanda, Alexander Ueberfeldt Should monetary policy lean against housing market booms? We approach this question using a small-scale, regime-switching New Keynesian model, where housing market crashes arrive with a logit probability that depends on the level of household debt. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial stability, Housing, Monetary policy framework JEL Code(s): E, E4, E44, E5, E52, G, G0, G01
A General Approach to Recovering Market Expectations from Futures Prices with an Application to Crude Oil Staff Working Paper 2016-18 Christiane Baumeister, Lutz Kilian Futures markets are a potentially valuable source of information about price expectations. Exploiting this information has proved difficult in practice, because time-varying risk premia often render the futures price a poor measure of the market expectation of the price of the underlying asset. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, D, D8, D84, G, G1, G14, Q, Q4, Q43
Opaque Assets and Rollover Risk Staff Working Paper 2016-17 Benjamin Nelson, Toni Ahnert We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): G, G0, G01, G2