The Effect of the US Sub-Prime Crisis on Canadian Banks
54 Pages Posted: 29 Aug 2014 Last revised: 16 Sep 2016
Date Written: August 29, 2016
We examine whether the Canadian banking sector was afflicted by financial contagion from the 2008 sub-prime crisis in the United States financial sector. We find that Canadian banks were affected by contagion, though those with higher liquidity withstood better its adverse effects. Our results indicate that Canadian banks that had more transparent asset practices appear to be less adversely affected by contagion. However, higher levels of real estate-related assets including mortgage-backed securities worsened the impact of contagion.
Keywords: Financial Crisis; Contagion; Asset Quality
JEL Classification: G01; G21
Suggested Citation: Suggested Citation