Staff research

Both supply and demand factors help determine the level of business lending in the economy, but most data show only their combined effect on prices and quantities. Using the Bank of Canada’s Senior Loan Officer Survey microdata on financial institutions’ lending conditions and demand, we separate supply from demand effects.

Over the past several years, the Bank for International Settlements has noted that Canada’s credit-to-GDP gap has widened and is above thresholds indicating future banking stress.