Why Do Shoppers Use Cash? Evidence from Shopping Diary Data Staff Working Paper 2012-24 Naoki Wakamori, Angelika Welte Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Econometric and statistical methods, Financial services JEL Code(s): C, C2, D, D1, G, G2
The Ex-Ante Versus Ex-Post Effect of Public Guarantees Staff Working Paper 2012-22 H. Evren Damar, Reint Gropp, Adi Mordel In October 2006, Dominion Bond Rating Service (DBRS) introduced new ratings for banks that account for the potential of government support. The rating changes are not a reflection of any changes in the respective banks’ credit fundamentals. 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, G28, G3, G32
Consumer Bankruptcy and Information Staff Working Paper 2012-18 Jason Allen, H. Evren Damar, David Martinez-Miera We analyze the relationship between the intensity of banks’ use of soft-information and household bankruptcy patterns. Using a unique data set on the universe of Canadian household bankruptcies, we document that bankruptcy rates are higher in markets where the collection of soft, or qualitative locally gathered information, is the weakest. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial services JEL Code(s): D, D4, G, G2
On the Existence and Fragility of Repo Markets Staff Working Paper 2012-17 Hajime Tomura This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G2, G24
The U.S.-Dollar Supranational Zero-Coupon Curve Staff Discussion Paper 2012-5 Francisco Rivadeneyra The author describes the construction of the U.S.-dollar-denominated zero-coupon curve for the supranational asset class from 1995 to 2010. He uses yield data from a crosssection of bonds issued by AAA-rated supranational entities to fit the Svensson (1995) term-structure model. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Asset pricing, Financial markets JEL Code(s): G, G1, G12, G15
Estimating the Demand for Settlement Balances in the Canadian Large Value Transfer System Staff Working Paper 2012-15 Nellie Zhang This paper applies a static model of an interest rate corridor to the Canadian data, and estimates the aggregate demand for central-bank settlement balances in the Large Value Transfer System (LVTS). Content Type(s): Staff research, Staff working papers Research Topic(s): Interest rates, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): C, C3, C36, E, E4, E40, E5, E50, G, G0, G01
May 17, 2012 Understanding Systemic Risk in the Banking Sector: A MacroFinancial Risk Assessment Framework Bank of Canada Review - Spring 2012 Céline Gauthier, Moez Souissi The MacroFinancial Risk Assessment Framework (MFRAF) models the interconnections between liquidity and solvency in a financial system, with multiple institutions linked through an interbank network. The MFRAF integrates funding liquidity risk as an endogenous outcome of the interactions between solvency risk and the liquidity profiles of banks, which is a complementary approach to the new […] Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): E, E4, E44, G, G0, G01, G2, G21
May 17, 2012 Conference Summary: New Developments in Payments and Settlement Bank of Canada Review - Spring 2012 Ben Fung, Miguel Molico The Bank of Canada’s annual conference, held in November 2011, brought together leading researchers from universities, central banks and other institutions from around the world. Divided into four sessions plus two keynote addresses, the conference covered such topics as the use of cash and other means of payment in retail transactions, large-value payments systems, and […] Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Bank notes, Central bank research, Financial system regulation and policies, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G28, L, L8, L81
Risk Premium, Variance Premium and the Maturity Structure of Uncertainty Staff Working Paper 2012-11 Bruno Feunou, Jean-Sébastien Fontaine, Abderrahim Taamouti, Roméo Tedongap Expected returns vary when investors face time-varying investment opportunities. Long-run risk models (Bansal and Yaron 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton 2000) emphasize sources of risk that are not observable to the econometrician. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial services JEL Code(s): G, G1, G12, G13
A Note on Central Counterparties in Repo Markets Staff Discussion Paper 2012-4 Hajime Tomura The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial markets, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G2, G24