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Bridging Canadian Business Lending and Market-Based Risk Measures

Author

Listed:
  • Guillaume Ouellet Leblanc
  • Maxime Leboeuf

Abstract

Lending to business is central to economic growth because it supports investment by firms. Knowing how market participants view risk in the financial system can give the Bank of Canada information about future growth in business loans. In this note, we look at three market-based risk measures and find that sudden increases in the perception of risk in the Canadian banking system are associated with a weaker outlook for business loans and real gross domestic product.

Suggested Citation

  • Guillaume Ouellet Leblanc & Maxime Leboeuf, 2019. "Bridging Canadian Business Lending and Market-Based Risk Measures," Staff Analytical Notes 2019-26, Bank of Canada.
    • Handle: RePEc:bca:bocsan:19-26
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    File URL: https://www.bankofcanada.ca/2019/08/staff-analytical-note-2019-26/
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    References listed on IDEAS

    as
    1. Maxime Leboeuf & Daniel Hyun, 2018. "Is the Excess Bond Premium a Leading Indicator of Canadian Economic Activity?," Staff Analytical Notes 2018-4, Bank of Canada.
    2. Linda Allen & Turan G. Bali & Yi Tang, 2012. "Does Systemic Risk in the Financial Sector Predict Future Economic Downturns?," The Review of Financial Studies, Society for Financial Studies, vol. 25(10), pages 3000-3036.
    3. Maxime Leboeuf & James Pinnington, 2017. "What Explains the Recent Increase in Canadian Corporate Bond Spreads," Staff Analytical Notes 17-2, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business fluctuations and cycles; Financial markets;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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