Modelling the Macrofinancial Effects of a House Price Correction in Canada
Maarten van Oordt (),
Xiangjin Shen and
No 2018-36, Staff Analytical Notes from Bank of Canada
We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline. The rates of arrears rise for households and businesses, which puts some pressure on banks. But the large banks remain resilient through the risk scenario, supported by their international diversification and their ability to replenish capital with retained earnings. As with any simulation exercise, the results are subject to significant uncertainty and depend on the specifics of the scenario being considered.
Keywords: Financial Institutions; Financial stability; Housing (search for similar items in EconPapers)
JEL-codes: E27 E37 E44 G21 (search for similar items in EconPapers)
Pages: 13 pages
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsan:18-36
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