Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197842 
Year of Publication: 
2017
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2017-36
Publisher: 
Bank of Canada, Ottawa
Abstract: 
I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand. This last assumption is based on empirical evidence for Canada revealing that non-regulated intermediaries issue loans at a lower interest rate. My results suggest that the non-regulated sector contributes to stabilize the economy by providing an alternative source of capital when the regulated sector in unable to fulfill the demand for credit. As a result, an economy with a large non-regulated sector experiences a smaller downturn after an adverse financial shock.
Subjects: 
Business fluctuations and cycles
Economic models
Financial systemregulation and policies
Housing
JEL: 
E32
E44
E47
E60
G21
G23
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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