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The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?
Author:
Rupa Duttagupta null

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and
N. Barrera
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Series:
IMF Working Papers
Volume/Issue:
Volume 2010: Issue 005
Language:
English
Publication Date:
01 Jan 2010
DOI:
https://doi.org/10.5089/9781451961751.001
ISBN:
9781451961751
ISSN:
1018-5941
Pages:
19
Keywords:
WP; real GDP; real GDP growth; Canada; lending
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund