Phoebe Tian

I'm a Senior Economist at Bank of Canada as part of the Economic and Financial Research Department and Financial Stability Department. [All views on this website are my own and not those of the Bank of Canada.]

Education:

🎓 PhD in Economics, 2016–2021

University of Wisconsin-Madison

🎓 BSc in Mathematical Economics and Finance, 2012-2016

Central University of Finance and Economics

Research Interest:

Financial Economics, Industrial Organization.

Contact:

📧XTian [at] bank-banque-canada [dot] ca

CV

Working Papers

Mortgage Put-back and Lender Market Power with Chen Zheng

Previous title "Unintended Consequences of Policy Interventions: Evidence from the Home Affordable Program"

Awarded the 2023 Public Utility Research Center Prize for the best paper in regulatory economics at the International Industrial Organization Conference (IIOC)

Also presented at the 2025 Annual Conference at the Banco Central do Brasil, 2025 CEA Conference, 2025 Northern Finance Association (NFA) Meeting (scheduled)

Abstract: We study the unintended effects of the Home Affordable Refinance Program (HARP) on mortgage borrowers. Originally designed to help underwater borrowers refinance after 2008, HARP inadvertently amplified the market power of incumbent lenders by introducing a cost differential between incumbents and their competitors. To assess the welfare implications of this cost advantage, we develop and estimate a structural model of dynamic refinancing decisions with lenders’ offers arising from a search and negotiation process. Our findings reveal that although the cost asymmetry was rectified by a 2013 policy, it still resulted in a welfare loss exceeding the impact of search frictions.

How Banks Create Gridlock to Save Liquidity in Canada's Large Value Payment System with Rod Garratt and Zhentong Lu (Revise & Resubmit at Journal of Money, Credit and Banking)

Presented at the 2022 International Conference on Payments and Settlement, the 2022 Bank of Finland Payment and Settlement Simulator Seminar

Abstract: Using detailed data from the introduction of a new high value payment (HVPS) system in Canada, we show how participants learn to use the new gridlock resolution arrangement and coordinate to create gridlocks to save liquidity. These observed behaviors are consistent with the equilibrium of a ``gridlock game'' that captures the key incentives participants face in the system. The findings have important implications for the design of HVPSs and shed light on financial institutions' liquidity preference.

Liquidation Mechanisms and Price Volatility of Cryptocurrencies with Yu Zhu

Presented at the Workshop on Digitalization and Macroprodential Policies at Kyoto University, UW-Madison PhD Alumni Conference

Abstract: This paper studies how the liquidation mechanism in DeFi loans affects the price volatility of cryptocurrencies. We consider the two commonly used mechanisms: fixed spread, and auctions. We show that results depend on liquidators' cost of participating in liquidations. If this cost is low, auctions amplify negative shocks less than the fixed spread mechanism. If this cost is high, the reverse is true. If the cost is intermediate, auctions amplify small negative shocks less and big shocks more than the fixed-spread mechanism.

The Role of Long-Term Contracting in Business Lending (JMP)

Presented at 2020 International Industrial Organization Conference , Annual Meeting of the Midwest Economic Association (cancelled), Annual Meeting of the Southern Economic Association

Abstract: This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. I develop and estimate a dynamic model where firms repeatedly interact with the same lender. All loans are short-term. Collateral can be used to deter a strategic default by a firm, but the lender cannot recover the full value of the collateral in the case of a default. The endogenous contract terms—including interest rates, loan size and collateral—reflect a firm’s probability of default in equilibrium. Learning drives the dynamics of contract terms because a firm’s profitability type is unknown. Long-term contracts improve welfare mainly by mitigating the incentives for a firm to default.

Policy Papers

From LVTS to Lynx: Quantitative Assessment of Payment System Transition (with Ajit Desai, Zhentong Lu, Hiru Rodrigo, Jacob Sharples, Nellie Zhang)

Journal of Payment Strategy and Systems

(Media coverage: Canadian RTGS system improves payments efficiency, paper says - Central Banking)

The International Exposure of the Canadian Banking System (with Christian Friedrich, Hanno Friedrich, Nick Lawrence, Javier Cortes Orihuela)

BoC Staff Working Paper

Three things we learned about the Lynx payment system (with Nikil Chande, Zhentong Lu, Hiru Rodrigo)

BoC Staff Analytical Notes

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