Bibliographic record
Abstract
As lender of last resort, the Bank of Canada has the responsibility of stepping in to provide liquidity in cases when markets require emergency funding. In crisis situations, a timely and effective response is imperative for avoiding systemic breakdowns. In this Commentary, I argue that in order to achieve this goal, a predefined, permanent, market-wide emergency liquidity mechanism should be established. The benefits of such a mechanism, including on-going design improvement and transparency for market participants, outweigh concerns over the moral hazard it may generate. The financial crisis of 2008-09 led to a new set of reforms through the Basel III regulatory framework. These rules have provided stability, including by limiting risky behaviour by financial institutions. However, they have also created a significantly smaller market for liquidity. Therefore, in future times of stress, financial institutions will face increased difficulty obtaining funding from private markets. Furthermore, as technologies become more sophisticated, idiosyncratic shocks can propagate into systemic shocks faster than ever before. Combined, these concerns suggest the need for pre-established, non-discretionary, market-wide emergency liquidity facilities that are instantly available in times of crisis. The permanence of such facilities would allow the design to be improved as market conditions evolve, while the removal of discretion would increase the level of transparency that is vital for a well-functioning financial sector. While the design of the emergency liquidity features introduced by the Bank of Canada during the 2008- 09 global economic crisis was appropriate, the auction format used likely fell short of generating the competitive prices and quantities that create both optimal liquidity distribution and the highest possible return for the public. In this paper, I recommend the use of the “Product-Mix” auction design, which involves an unlimited bid, single-round process in which bids are made on different forms of collateral simultaneously, and no minimum reference price above the benchmark overnight rate is established in advance. The Bank should continue to use discriminatory pricing for different term repos and uniform pricing for term loan facilities. Overall, these characteristics should improve the outcome of any future auctions from the viewpoint of both financial institutions and central bankers.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.003 | 0.009 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.005 | 0.010 |
| Scholarly communication | 0.009 | 0.009 |
| Open science | 0.003 | 0.002 |
| Research integrity | 0.017 | 0.012 |
| Insufficient payload (model declined to judge) | 0.007 | 0.001 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".