I will quickly add, however, that the pressures in Canadian financial markets have been less intense because of the relatively healthy balance sheets of households, firms, and financial institutions in Canada. The entire episode, which is by no means fully played out, can be seen as an overdue repricing of risk, a recognition of losses, and a recapitalization of balance sheets.
The decline in housing prices has also led to a fall in household wealth. Our standard estimate of the wealth effect is that a 10 per cent fall in housing prices leads to a 1½ per cent fall in household consumption over time.