IDEAS home Printed from
   My bibliography  Save this paper

Real-Financial Linkages in the Canadian Economy: An Input-Output Approach


  • Danny Leung
  • Oana Secrieru


The purpose of this paper is twofold. First, we provide a detailed social accounting matrix (SAM), which incorporates the income and financial flows into the standard input-output matrix, for the Canadian economy for 2004. Second, we use the SAM to assess the strength of the real-financial linkages by calculating and comparing real SAM multipliers and financial social accounting matrix (FSAM) multipliers. For FSAM multipliers, financial flows are endogenous, whereas for real SAM multipliers they are not. Our results show that taking into account financial flows increases the impact of a final demand shock on Canadian output. Financial flows also play an important role in determining the cumulative effect of an income shock or the availability of investment funds. Between 2008 and the first half of 2009, financial institutions shifted their investments towards government bonds, short-term paper, and foreign investments. This shift together with the fact that non-financial institutions were unwilling or unable to increase their financial liabilities, led to estimated declines in all GDP multipliers between 2008 and the first half of 2009 (2009H1). The main advantage of using the extended input-output impact analysis is that it provides a simple framework, with very few assumptions, which allows the assessment of the strength of real-financial linkages by means of multipliers. However, our methodology is subject to the Lucas critique, that as shocks shift prices, agents cannot adjust. Such a framework is, nevertheless, appropriate in short-term impact analysis such as ours.

Suggested Citation

  • Danny Leung & Oana Secrieru, 2011. "Real-Financial Linkages in the Canadian Economy: An Input-Output Approach," Staff Working Papers 11-14, Bank of Canada.
  • Handle: RePEc:bca:bocawp:11-14

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393 Elsevier.
    3. Statistics Canada, 2009. "Trends in Gross Domestic Product and Self-employment of Unincorporated Enterprises in the Canadian Economy, 1987 to 2005," Insights on the Canadian Economy 2009024e, Statistics Canada, Economic Analysis Division.
    4. Ian Christensen & Ali Dib, 2008. "The Financial Accelerator in an Estimated New Keynesian Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 155-178, January.
    5. Brian Wixted & Norihiko Yamano & Colin Webb, 2006. "Input-Output Analysis in an Increasingly Globalised World: Applications of OECD's Harmonised International Tables," OECD Science, Technology and Industry Working Papers 2006/7, OECD Publishing.
    6. Thorbecke, Erik & Jung, Hong-Sang, 1996. "A multiplier decomposition method to analyze poverty alleviation," Journal of Development Economics, Elsevier, vol. 48(2), pages 279-300, March.
    7. Marcel Timmer & Pirkko Aulin-Ahmavaara, 2007. "New Developments in Productivity Analysis within an Input-Output Framework: an Introduction," Economic Systems Research, Taylor & Francis Journals, vol. 19(3), pages 225-227.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:ege:wpaper:1502 is not listed on IDEAS
    2. Luis Enrique Pedauga & Aray, Henry & Velazquez, Agustín, 2016. "A Financial Social Accounting Matrix for the Spanish Economy," EcoMod2016 9490, EcoMod.
    3. Aydoğuş, Osman & Deger, Cagacan & Tunalı Çalışkan, Elif & Gürel Günal, Gülçin, 2015. "Regional Input-Output Analysis of A Mega-Event: Possible Impact of EXPO on Izmir Economy," MPRA Paper 65547, University Library of Munich, Germany.

    More about this item


    Economic models; Financial markets; Sectoral balance sheet;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:11-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.