The Credit Cycle And The Business Cycle In Canada And The U.S.: Two Solitudes
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 allow for the possibility that macroeconomic and financial market conditions in the U.S. affect those in Canada. The responses to financial shocks are dissimilar in both countries. 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.
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| Length: | 35 |
| Date of creation: | 10 Mar 2014 |
| Date of revision: | |
| Handle: | RePEc:wlu:lcerpa:wm0065 |
| Contact details of provider: | Postal: 75 University Ave. West, Waterloo, Ontario, N2L 3C5 Phone: (519) 884-0710 ext 2056 Fax: (519) 884-0201 Web page: http://lcerpa.org More information through EDIRC
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References listed on IDEAS
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