As a result of the global financial crisis countercyclical capital requirements have been discussed to prevent fi nancial bubbles generated in the banking sector and to mitigate the adverse effects of fi nancial repression after a bubble burst. This paper analyses the effects of an endogenous...

We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by...