The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?
Electronic Access:
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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.
Series:
Working Paper No. 2010/005
Subject:
Domestic credit Oil prices Real effective exchange rates Treasury bills and bonds Vector autoregression
English
Publication Date:
January 1, 2010
ISBN/ISSN:
9781451961751/1018-5941
Stock No:
WPIEA2010005
Pages:
19
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