The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?

January 1, 2010

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Rupa Duttagupta, and N. Barrera The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?, (USA: International Monetary Fund, 2010) accessed September 19, 2024

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

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.

Subject: Domestic credit, Oil prices, Real effective exchange rates, Treasury bills and bonds, Vector autoregression

Keywords: Canada, Lending, Real GDP, Real GDP growth, WP

Publication Details

Pages:

19
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2010/005
Stock No:

WPIEA2010005
ISBN:

9781451961751
ISSN:

1018-5941

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