Capturing financial network linkages and contagion in stress test models are important goals for banking supervisors and central banks responsible for micro- and macroprudential policy. However, granular data on financial networks is often lacking, and instead the networks must be reconstructed...

The COVID-19 pandemic forced policy-makers to deploy a range of unprecedented measures to support the economy. In this discussion paper, we discuss the outcome of the economic measures implemented in the context of financial stability in Canada. We also present related challenging policy...

We evaluate the effects of contagion and common exposure on banks' capital through a regression design inspired by the structural VAR literature and derived from the balance sheet identity. Contagion can occur through direct exposures, fire sales, and market-based sentiment, while common...

We present a model in which shadow banking arises endogenously and undermines market discipline on traditional banks. Demandable deposits impose market discipline: Without shadow banking, traditional banks optimally pursue a safe portfolio strategy to prevent early withdrawals. Shadow banking...

We present a model in which shadow banking arises endogenously and undermines marketdiscipline on traditional banks. Depositors' ability to re-optimize in response to crisesimposes market discipline on traditional banks: these banks optimally commit to a safeportfolio strategy to prevent early...

We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres - the United Kingdom, Hong Kong and Ireland - we examine how NIRP in the economies where banks have their...

We study the effects of negative interest rate policies (NIRP) on the transmission of monetary policy through cross-border lending. Using bank-level data from international financial centres (IFCs) – the United Kingdom, Hong Kong and Ireland – we examine how NIRP in the economies where banks...