THE CREDIT CYCLE AND THE BUSINESS CYCLE IN CANADA AND THE U.S.: TWO SOLITUDES

B. Lavender P. Siklos ()
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B. Lavender P. Siklos: LCERPA

LCERPA Working Papers from Laurier Centre for Economic Research and Policy Analysis

Abstract: Recent events highlight the importance of understanding the relationship between credit availability and real economic activity. This paper estimates macroeconomic models for Canada to investigate the relationship between changes in non-price lending standards, business loans and output. We allow for the possibility that macroeconomic and financial market conditions in the U.S. affect those in Canada. The responses to financial shocks are dissimilar in both countries. Real time data are also found to have a significant impact on the results. The U.S. and Canada may indeed be likened to 'two solitudes' insofar as the impact of credit conditions is concerned. Differences in the quality of banking standards and supervision of financial institutions, as well differences in the effectiveness of monetary policies in the two countries may partially explain the results.

Keywords: macro-financial linkages; credit standards; Loan Officer Survey (search for similar items in EconPapers)
JEL-codes: E32 E5 G21 (search for similar items in EconPapers)
Pages: 35
Date: 2014-03-10
New Economics Papers: this item is included in nep-ger and nep-mac
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http://lcerpa.org/public/papers/lcerpa_14_6.pdf

Related works:
Working Paper: The credit cycle and the business cycle in Canada and the U.S.: Two solitudes? (2015)
Working Paper: The credit cycle and the business cycle in Canada and the U.S.: Two solitudes? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:wlu:lcerpa:wm0065

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