ECO365H1 Lecture Notes - Lecture 10: Household Debt, Systemic Risk, Monetary Policy

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19 Apr 2019
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Canadian household debt to income has reached 178% Household debt to income ratio rose leading up to the financial crisis, but corrected afterwards for most countries except for canada and australia. High debt to income level may be indicative of bubble in canada. Exponential increase in prices is worrying, especially considering business cycles. We have had consistent growth since previous recession. Current rates are still low, meaning no room for expansionary monetary policy during next recession. Bank of canada cannot increase interest rates because of high level of debt. Increasing rates has systemic risk of household bankruptcy and fall in housing prices. Fiscal policy is not feasible because of rising debt to gdp levels around the world. To fix an exchange rate, government simply has to announce the exchange rate is fixed and buy and sell at the fixed rate to maintain the peg. Foreign bonds (aka reserves, usually usd), bf deposits from private banks, d.

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