Therefore, one direction of research at the Bank has been to isolate the key signals from this broad information set by identifying a smaller group of variables that can serve as early-warning indicators of emerging imbalances. Since financial crises in Canada have been rare, international data are used to help establish numerical thresholds for each domestic indicator.
For example, if international evidence suggests that credit growth above a certain rate tends to be associated with increased risk, then a period with credit growth above the threshold would suggest an elevated probability of financial stress.