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Author/Editor:
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Duttagupta, Rupa ; Barrera, Natalia
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Publication Date:
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January 01, 2010
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Electronic Access:
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Free Full text
(PDF file size is 929KB).
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
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Summary:
This paper builds a Bayesian VAR estimation model of growth for Canada, by focusing specifically on the role of external and domestic financial indicators, including credit conditions. A variance decomposition shows that financial conditions explain one-third of the total variability in Canada's real GDP growth, although changes in U.S. real GDP growth still account for a larger share of volatility in Canadian growth. A macro-financial conditions index built from the VAR's impulse responses shows that U.S. real GDP growth and lending standards will increasingly bear on Canada's growth, implying that a normalization of the U.S. economic and financial conditions is key for a sustained recovery in Canada.
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Series:
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Working Paper No. 10/5
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Subject(s):
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Bank credit | Canada | Credit controls | Economic forecasting | Economic growth | Economic models | External sector | Financial crisis | Global Financial Crisis 2008-2009 | Gross domestic product | Monetary policy | Spillovers
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Author's Keyword(s):
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Macro-financial linkages | Bayesian VAR estimation | lending standards |
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