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COVID and Financial Stability: Practice Ahead of Theory

Author

Listed:
  • Jing Yang
  • Hélène Desgagnés
  • Grzegorz Halaj
  • Yaz Terajima

Abstract

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 questions that are being tackled by staff at the Bank. These include the uneven impact of the pandemic on households’ financial conditions and how it affects the transmission of policy, the challenges associated with setting banks’ countercyclical capital buffers, detecting imbalances in a buoyant housing market, and policy coordination challenges.

Suggested Citation

  • Jing Yang & Hélène Desgagnés & Grzegorz Halaj & Yaz Terajima, 2022. "COVID and Financial Stability: Practice Ahead of Theory," Discussion Papers 2022-18, Bank of Canada.
    • Handle: RePEc:bca:bocadp:22-18
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    References listed on IDEAS

    as
    1. Sami Alpanda & Gino Cateau & Césaire Meh, 2018. "A policy model to analyze macroprudential regulations and monetary policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 828-863, August.
    2. Grzegorz Halaj & Sofia Priazhkina, 2021. "Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions," Staff Working Papers 21-35, Bank of Canada.
    3. Alejandro García & Josef Schroth, 2021. "Can regulating bank capital help prevent and mitigate financial downturns?," Staff Analytical Notes 2021-12, Bank of Canada.
    4. International Monetary Fund, 2020. "Canada: Financial Sector Assessment Program-Technical Note-Stress Testing and Financial Stability Analysis," IMF Staff Country Reports 2020/016, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Hałaj, Grzegorz & Martinez-Jaramillo, Serafin & Battiston, Stefano, 2024. "Financial stability through the lens of complex systems," Journal of Financial Stability, Elsevier, vol. 71(C).

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    More about this item

    Keywords

    Coronavirus disease (COVID-19); Financial stability; Financial system regulation and policies;
    All these keywords.

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H84 - Public Economics - - Miscellaneous Issues - - - Disaster Aid
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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