"A Research Strategy for Counterfactual Analysis of Canadian Financial Sector Policy"

While asking counterfactual questions may be straightforward, answering them can prove to be intractable. This talk outlines a three-step strategy for answering the question "if Canadian banks were allowed to merge in 1998, would they have failed in 2008?" and illustrates each methodological step with preliminary evidence gathered to date. Step 1 uses traditional historiographic methods to develop "surface" explanations of factors behind the stability of Canadian banks in 2008. Step 2 is a deeper empirical investigation into the dominant factors behind bank stability in general, and in Canada in particular. If, in 1998, banks had merged, some of these factors might have changed and what is learned in Steps 1 and 2 will allow an assessment of what might then have happened in 2008.

David Pringle is a PhD candidate, SPPA, at Carleton University.