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The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?


  • Rupa Duttagupta
  • N. Barrera


This paper builds a Bayesian VAR estimation model of growth for Canada, by focusing specifically on the role of external and domestic financial indicators, including credit conditions. A variance decomposition shows that financial conditions explain one-third of the total variability in Canada's real GDP growth, although changes in U.S. real GDP growth still account for a larger share of volatility in Canadian growth. A macro-financial conditions index built from the VAR's impulse responses shows that U.S. real GDP growth and lending standards will increasingly bear on Canada's growth, implying that a normalization of the U.S. economic and financial conditions is key for a sustained recovery in Canada.

Suggested Citation

  • Rupa Duttagupta & N. Barrera, 2010. "The Impact of the Global Crisis on Canada—What Do Macro-Financial Linkages Tell Us?," IMF Working Papers 10/5, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/5

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    References listed on IDEAS

    1. Pär Österholm, 2008. "Can forecasting performance be improved by considering the steady state? An application to Swedish inflation and interest rate," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(1), pages 41-51.
    2. P&aauml;r Österholm & Jeromin Zettelmeyer, 2008. "The Effect of External Conditions on Growth in Latin America," IMF Staff Papers, Palgrave Macmillan, vol. 55(4), pages 595-623, December.
    3. Lisandro Abrego & Pär Österholm, 2010. "External Linkages and Economic Growth in Colombia: Insights from a Bayesian VAR Model," The World Economy, Wiley Blackwell, vol. 33(12), pages 1788-1810, December.
    4. Vladimir Klyuev, 2008. "Real Implications of Financial Linkages Between Canada and the United States," IMF Working Papers 08/23, International Monetary Fund.
    5. Mattias Villani, 2009. "Steady-state priors for vector autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 24(4), pages 630-650.
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    Cited by:

    1. Al-Shboul, Mohammad & Anwar, Sajid, 2014. "Pricing of the currency risk in the Canadian equity market," Research in International Business and Finance, Elsevier, vol. 30(C), pages 173-194.
    2. Akira Kohsaka & Jun-ichi Shinkai, 2014. "East Asian Financial Cycles: Asian vs. Global Financial Crises," OSIPP Discussion Paper 14E008, Osaka School of International Public Policy, Osaka University.
    3. Mirajul Haq & Karim Khan & Ayesha Parveen, 2014. "The Growth and Employment Impacts of the 2008 Global Financial Crisis on Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 19(2), pages 129-154, July-Dec.


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