Research seminar by Meet Shah

Title: The Effect of Macroeconomic Shock on Mortgage Delinquency: A Case Study of Oil Shock in Canada

Abstract: Understanding the effect of a macroeconomic shock on the financial system is imperative to formulating appropriate policy responses. With the oil sector highly concentrated in the western Prairie provinces of Canada, the 2014–16 oil price shock is a useful case study to shed light on the effect of a substantial terms-of-trade shock on consumers’ financial distress. Specifically, we estimated the treatment effect of the oil shock on loan performance in Alberta and Saskatchewan, oil-dependent provinces, during/after the oil price collapse. The treatment effect is estimated via the synthetic control method. Our results show that, by the end of 2018, the delinquency rates for the oil-dependent provinces are 0.20% to 0.48% higher than they would have been in the absence of the oil shock. The treatment effect is also stronger for regions with more mono-product focus on oil. Our findings also apply to other economies relying heavily on international trade and susceptible to commodity price volatility.

Bio: Meet is a PhD candidate in Real Estate Management at the Ted Rogers School of Management. His research interests include real estate finance, urban economics, fixed-income securities, and climate finance. He holds a Bachelor of Business Administration in Finance from Brock University and a Master of Science in Management from Toronto Metropolitan University.