Job Market Paper
"The Effect of Macroprudential Policies on Household Balance Sheets"
The Government of Canada has implemented a number of macroprudential policies aimed at stabilizing the housing market and controlling household mortgage borrowing. The question of whether they have any spillover effect on a household’s balance sheet composition has not been answered so far. This study addresses it by examining the effect of two policies implemented in 2016: a change in minimum down payment and the implementation of “stress test” for insured mortgage, on three asset (RRSP, TFSA, money in the bank) and three debt (nonmortgage debt, credit card debt, home equity line of credit) components in Canadian households’ balance sheet. Using household-level data from the 2016 and 2019 waves of the Survey of Financial Security (SFS) and employing a Difference-in-difference (DID) framework, the study finds that high loan-to-value (LTV) homeowners have higher home equity line of credit (HELOC) balances after the policy changes compared to low LTV households. It also finds evidence that high LTV homeowners have lower liquid asset balances. The findings suggest that, while overall debt usage and illiquid/retirement asset balances of the household balance sheet are unaffected, the policy changes influence wealth-constrained households to borrow more against their home equity and have less in liquid savings.
Publication
The study explores the decision making process of Bangladeshi stock market investors. We interview 31 investors currently holding stock portfolio in the Dhaka Stock Exchange (DSE) to understand their choices and decision making process. Based on the findings, we develop an Ethnographic Decision Tree Model (EDTM) of Stock Selection. We find that a stock usually comes to an investor’s attention through news/ rumors or suggestions received from family/ friends/ broker or on the basis of past experience. Information use often depends on trust and the necessity to act on it immediately. In an active search process, ‘filter’ criteria are used to reduce the choice set of stocks for further evaluation. The nature of evaluation depends on whether investors looking to invest in the long or the short term. Finally, stock selection depends on whether investors perceive the stock to be undervalued and whether the stock fits her/ his investment strategy. We also find that collective intelligence affects an individual’s investment decision and trustworthiness of the information source is a key factor in determining her/ his investment behavior.
Working Paper
"Payday lending Regulation and its Impact on Food Security in Canada"
This study assesses the relationship between household food security and payday lending regulation in Canada. I examine the impact of the 2007 federal Bill C-26, which transferred regulatory authority over payday loans to the provinces, allowing them to permit effective annual interest rates above the 60% criminal rate, provided they implemented consumer protection measures. Using data from the Canadian Community Health Survey (CCHS) linked to the T1 Family File (T1FF) from 2007 to 2012, I estimate the effects of this regulatory change on food security using a difference-in-differences framework. While I find no statistically significant effect of the new regulatory regime on food security overall, I find substantial heterogeneity in the effects at the province level that appear to be related to borrowing costs. In the province with the highest borrowing costs (Nova Scotia), the introduction of provincial regulation is associated with a statistically significant 11 percentage point increase in the probability of food insecurity. In provinces with lower costs of borrowing and limits on borrowed amounts, I find evidence that the change in the regulatory regime for payday lending improved household food security. These results suggest that while regulations allowing higher interest rates might lead to deteriorating food security, consumer protection measures such as borrowing caps can nullify the negative impact of high borrowing costs or potentially improve households’ food security situation.
Work in Progress
"Gig Work Availability and the Receipt of Government Transfers" (with Andrew McGee)
Using administrative tax records and a novel dataset measuring the entry of digital platforms into Canada between 2010 and 2022, we examine whether having the option of engaging in gig work influences the government assistance received by individuals experiencing unemployment spells. On the one hand, entering gig work may speed individuals' return to employment and reduce the receipt of unemployment benefits. On the other hand, gig workers do not receive employment benefits from employers and may rely more heavily on forms of social insurance as a consequence. That is, entering gig work may help workers experiencing job loss smooth their incomes, but it may also force such individuals to rely on other forms of social insurance, given that they do not have access to other types of insurance through employment (e.g., paid sick leave, workers' compensation). We estimate the short- and long-run effects of entering unemployment in regions with more options for digital platform work among workers with a high propensity of entering gig work on income, the receipt of employment insurance, earned income tax credits, and other forms of social assistance.