May 14, 2020
Financial system regulation and policies
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Optimal Taxation in Asset Markets with Adverse Selection
What is the optimal tax schedule in over-the-counter markets, e.g., those for corporate bonds? I find that an optimal tax schedule is often non-monotonic. For example, trading of some high-price assets should be subsidized, and trading of some low-price assets should be taxed. -
Managing GDP Tail Risk
Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs. -
Loan Insurance, Market Liquidity, and Lending Standards
We examine loan insurance—credit risk transfer upon origination—in a model in which lenders can screen, learn loan quality over time, and can sell loans. Some lenders with low screening ability insure, benefiting from higher market liquidity of insured loans while forgoing the option to exploit future information about loan quality. -
November 19, 2019
Climate change is a big issue for central banks
Climate change is transforming the economy and financial system -
November 19, 2019
Financial Stability in an Uncertain World (Full Remarks)
Senior Deputy Governor Carolyn A. Wilkins provides an update on the Canadian financial system and discusses measures in place that increase its resilience in a challenging global environment. -
November 19, 2019
Financial stability in an uncertain world
Senior Deputy Governor Carolyn A. Wilkins talks about the recent strengthening of Canada’s financial system. -
A Macroprudential Theory of Foreign Reserve Accumulation
This paper proposes a theory of foreign reserves as macroprudential policy. We study an open-economy model of financial crises in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation. -
Financial Frictions, Durable Goods and Monetary Policy
Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints. -
Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation
Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.