The high level of household indebtedness and stretched valuations in some segments of the Canadian housing market poses a potential risk to financial stability in the country. To protect and strengthen the Canadian housing market, the government has taken prudential measures during 2008 to 2012 to reduce the risks associated with the housing market. This paper conducts an empirical analysis regarding the effectiveness of Canadian macro-prudential policies based on the user cost model. This paper found that the four rounds of policy changes were effective in reining in housing price and reducing housing credit growth in the five provinces including Ontario, British Columbia, Alberta, Quebec and Manitoba to varying degrees based on their diverse provincial economic backgrounds.
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