Recent economic and financial developments

• December 8, 1994

  Some macroeconomic implications of rising levels of government debt

  Bank of Canada Review - Winter 1994-1995 Tiff Macklem

  The level of government debt in Canada relative to gross domestic product has risen steadily since the mid-1970s. Canada has not been alone in experiencing rising government indebtedness, but in comparison to other countries, Canada's debt load is now distinctly on the high side. The author reviews some of the effects of rising government debt levels on macroeconomic performance and provides some calculations aimed at illustrating their possible long-run impact on the Canadian economy. His analysis, which is based on a model of the Canadian economy used at the Bank of Canada, suggests that higher levels of government debt reduce both the level of output and the share of output that is available for domestic consumption. The central policy implication is that there are substantial benefits to halting the rise in government debt and thus preventing further erosion of consumption opportunities.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Fiscal policy, Recent economic and financial developments

• Les provinces canadiennes et la convergence : une évaluation empirique

  Staff Working Paper 1994-10 Mario Lefebvre

  This paper examines whether the hypothesis of economic convergence holds for the Canadian provinces. Using data on real gross domestic product per capita and on factor productivity from 1966 to 1992, the paper shows, using two different methods, that the convergence hypothesis cannot be rejected. This evidence supports the findings of other authors who have studied convergence among Canadian provinces.

  Content Type(s): Staff research, Staff working papers Topic(s): Recent economic and financial developments

• An Empirical Investigation into Government Spending and Private Sector Behaviour

  Staff Working Paper 1994-8 Robert Amano, Tony S. Wirjanto

  We examine whether there is a significant relationship between government and private consumption for Canada. We derive estimating equations between the two types of consumption under both cointegration and no-cointegration assumptions.

  Content Type(s): Staff research, Staff working papers Topic(s): Recent economic and financial developments

• The Dynamic Behaviour of Canadian Imports and the Linear-Quadratic Model: Evidence Based on the Euler Equation

  Staff Working Paper 1994-6 Robert Amano, Tony S. Wirjanto

  We examine the ability of the simple linear-quadratic model under rational expectations to explain dynamic behaviour of aggregate Canadian imports. In contrast to authors of previous studies who examine dynamic behaviour using the LQ model, we estimate the structural parameters using the Euler equation in a limited information framework that does not require an explicit solution for the model's control variables in terms of the exogenous forcing variables.

  Content Type(s): Staff research, Staff working papers Topic(s): Recent economic and financial developments