Bank of Canada
International Economic Analysis Department
234 Wellington Street
Ottawa ON K1A 0G9
Institutional Affiliation: Bank of Canada
Information about this author at RePEc
NBER Working Papers and Publications
|September 2019||A Macroprudential Theory of Foreign Reserve Accumulation|
with Fernando Arce, Javier Bianchi: w26236
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. The optimal reserve accumulation policy leans against the wind and significantly reduces the exposure to financial crises. The theory is consistent with the joint dynamics of private and official capital flows, both over time and in the cross section, and can quantitatively account for the recent upward trend in international reserves.
|September 2018||Macroprudential Policy with Leakages|
with Javier Bianchi: w25048
The outreach of macroprudential policies is likely limited in practice by imperfect regulation enforcement, whether due to shadow banking, regulatory arbitrage, or other regulation circumvention schemes. We study how such concerns affect the design of optimal regulatory policy in a workhorse model in which pecuniary externalities call for macroprudential taxes on debt, but with the addition of a novel constraint that financial regulators lack the ability to enforce taxes on a subset of agents. While regulated agents reduce risk taking in response to debt taxes, unregulated agents react to the safer environment by taking on more risk. These leakages undermine the effectiveness of macruprudential taxes but do not necessarily call for weaker interventions. A quantitative analysis of the mode...
|September 2016||Financial Safety Nets|
with Javier Bianchi, Louphou Coulibaly: w22594
In this paper, we study the optimal design of financial safety nets under limited private credit. We ask when it is optimal to restrict ex ante the set of investors that can receive public liquidity support ex post. When the government can commit, the optimal safety net covers all investors. Introducing a wedge between identical investors is inefficient. Without commitment, an optimally designed financial safety net covers only a subset of investors. Compared to an economy where all investors are protected, this results in more liquid portfolios, better social insurance, and higher ex ante welfare. Our result can rationalize the prevalent limited coverage of safety nets, such as the lender of last resort facilities.
Published: Julien Bengui & Javier Bianchi & Louphou Coulibaly, 2019. "FINANCIAL SAFETY NETS," International Economic Review, vol 60(1), pages 105-132. citation courtesy of
|September 2012||Capital Mobility and International Sharing of Cyclical Risk|
with Enrique G. Mendoza, Vincenzo Quadrini: w18372
This paper investigates whether the international globalization of financial markets allows for significant cross-country risk-sharing at the business cycle frequency. We find that cross-country risk-sharing is still limited and this is unlikely to be the result of financial frictions that limit state-contingent contracts. Part of the limited international risk sharing could be the consequence of frictions that de-facto reduce the short-term mobility of financial capital. But even with these frictions we find significant divergence between model predictions and the data.
Published: Bengui, Julien & Mendoza, Enrique G. & Quadrini, Vincenzo, 2013. "Capital mobility and international sharing of cyclical risk," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 42-62. citation courtesy of