The credit cycle and the business cycle in Canada and the U.S.: Two solitudes?
Pierre Siklos ()
LCERPA Working Papers from Laurier Centre for Economic Research and Policy Analysis
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 ask whether macroeconomic and financial market conditions in the U.S. affect Canadian macroeconomic and financial conditions. The answer seems to be less so than previous evidence suggests. 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)
Date: 2015-02-01, Revised 2015-02-01
Note: LCERPA Working Paper No. 2015-3
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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 (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wlu:lcerpa:0085
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