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The Impact Of The Global Crisis on Canada: What Do Macro-Financial Linkages Tell Us?
Author/Editor: Rupa Duttagupta, N Barrera
Release Date: © January, 2010
ISBN : 978-1-45196-175-1
Stock #: WPIEA2010005
Stock Status: On back-order
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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.
More publications in this series: Working Papers