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

Rupa Duttagupta and N. Barrera

No 2010/005, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; real GDP; real GDP growth; Canada; lending (search for similar items in EconPapers)
Pages: 19
Date: 2010-01-01
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Citations: View citations in EconPapers (8)

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