February 2, 2022
Financial system regulation and policies
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Quantifying the Economic Benefits of Payments Modernization: the Case of the Large-Value Payment System
Canada is undertaking a major initiative to modernize its payments ecosystem. The modernized ecosystem is expected to bring significant benefits to Canadian financial markets and the overall economy. We develop an empirical framework to quantify the economic benefits of modernizing the payment system in Canada. -
The Countercyclical Capital Buffer and International Bank Lending: Evidence from Canada
We examine the impact of the CCyB on foreign lending activities of Canadian banks. We show that the announcement of a tightening in another country’s CCyB leads to a decrease in the growth rate of cross-border lending between Canadian banks and borrowers in that other country. -
Democratic Political Economy of Financial Regulation
We offer a theory of how inefficiently lax financial regulation could arise in a democratic society. -
Are Bank Bailouts Welfare Improving?
Financial sector bailouts, while potentially beneficial during a crisis, might lead to excessive risk taking if anticipated. Taking expectations and aggregate risk implications into account, we show that bailouts can be welfare improving, but only if capital adequacy constraints are sufficiently tight. -
October 7, 2021
The long and short of it: A balanced vision for the international monetary and financial system
Governor Tiff Macklem advocates for global coordination to strengthen the international monetary and financial system. -
October 7, 2021
Investing in global progress
Governor Tiff Macklem makes the case for greater cooperation to shape a stronger international monetary and financial system. -
A Q-Theory of Banks
Using stock market data on banks, we show that the book value of loans recognizes losses with a delay. This delayed accounting is important for regulation because the requirements regulators impose are based on book values. -
Reaching for yield or resiliency? Explaining the shift in Canadian pension plan portfolios
“Reach for yield”—This is the commonly heard explanation for why pension plans shift their portfolios toward alternative assets. But we show that the new portfolios also hold more bonds, offer lower average returns and produce smaller and less volatile solvency deficits. These shifts are part of a broader strategy to reduce solvency risk. -
Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions
Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.