Modelling the Macrofinancial Effects of a House Price Correction in Canada

Thibaut Duprey, Xuezhi Liu, Cameron MacDonald, Maarten van Oordt, Sofia Priazhkina, Xiangjin Shen and Joshua Slive

No 2018-36, Staff Analytical Notes from Bank of Canada

Abstract: 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
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.bankofcanada.ca/wp-content/uploads/2018/11/san2018-36.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsan:18-36

Access Statistics for this paper

More papers in Staff Analytical Notes from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC.
Bibliographic data for series maintained by ().