H3 - Fiscal Policies and Behavior of Economic Agents

• February 23, 2012

  Household Borrowing and Spending in Canada

  Bank of Canada Review - Winter 2011-2012 Jeannine Bailliu, Katya Kartashova, Césaire Meh

  Understanding how much of the increased debt load of Canadian households has been used to finance household spending on consumption and home renovation is important for the conduct of monetary policy. In this article, the authors use a comprehensive data set that provides information on the uses of debt by Canadian households. They first present some facts regarding the evolution of Canadian household debt over the period from 1999 to 2010, emphasizing the increased importance of debt flows that are secured by housing. They then explore how Canadian households have used their borrowed funds over the same period, and assess the role of these borrowed funds in financing total consumption and spending on home renovation. Finally, they examine the possible effects of a decline in house prices on consumption when housing equity is used as collateral against household indebtedness.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Credit and credit aggregates, Domestic demand and components, Monetary policy transmission JEL Code(s): E, E2, E21, E5, E51, H, H3, H31

• Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy

  Staff Working Paper 2011-10 Huixin Bi

  We develop a closed economy model to study the interactions among sovereign risk premia, fiscal limits, and fiscal policy. The stochastic fiscal limits, which measure the ability and willingness of the government to service its debt, arise endogenously from a dynamic Laffer curve.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, International topics JEL Code(s): E, E6, E62, H, H3, H30, H6, H60

• On Fiscal Multipliers: Estimates from a Medium Scale DSGE Model

  Staff Working Paper 2010-30 Sarah Zubairy

  This paper contributes to the debate on fiscal multipliers, in the context of a structural model. I estimate a micro-founded dynamic stochastic general equilibrium model, that features a rich fiscal policy block and a transmission mechanism for government spending shocks, using Bayesian techniques for US data.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Fiscal policy JEL Code(s): C, C1, C11, E, E3, E32, E6, E62, H, H3, H30

• Trends in U.S. Hours and the Labor Wedge

  Staff Working Paper 2010-28 Simona Cociuba, Alexander Ueberfeldt

  From 1980 until 2007, U.S. average hours worked increased by thirteen percent, due to a large increase in female hours. At the same time, the U.S. labor wedge, measured as the discrepancy between a representative household's marginal rate of substitution between consumption and leisure and the marginal product of labor, declined substantially.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Labour markets, Potential output JEL Code(s): E, E2, E24, H, H2, H20, H3, H31, J, J2, J22

• The Global Effects of U.S. Fiscal Policy

  Staff Discussion Paper 2008-8 Kimberly Beaton

  The author examines the global impact of U.S. fiscal policy using the Bank of Canada's Global Economy Model (Lalonde and Muir 2007). In particular, she examines the global macroeconomic implications of the expiration of major tax cuts in the United States and of expected increases in U.S. entitlement program expenditures.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Fiscal policy, International topics, Regional economic developments JEL Code(s): H, H0, H2, H3

• The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization

  Staff Working Paper 1997-15 Jonathan Millar

  Budget rules can be defined as legislated or constitutional constraints on government deficits, taxes, expenditures, or debt. This paper reviews the budget rules recently legislated in six of Canada's provinces and both of its territories, as well as budget rules in other OECD countries.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy JEL Code(s): E, E6, E62, H, H3, H6, H61

• Government Debt in an Open Economy

  Technical Report No. 58 Douglas Laxton, Robert Tetlow

  This paper introduces the CORE model, a prototype for a new quarterly model of the Canadian economy, designed for projections and policy analysis with focus beyond the very short run. The model has a clearly defined equilibrium and explicit adjustment mechanisms, primarily through relative prices, that are dynamically stable. Overlaid on a neo-classical growth model […]

  Content Type(s): Staff research, Technical reports Topic(s): Fiscal policy JEL Code(s): C, C5, C53, F, F3, F32, H, H3, H30, H6, H60

• Some Implications of International Financial Integration for Canadian Public Policy

  Technical Report No. 57 William White

  The domestic capital markets of the major industrial countries have become more closely integrated over the last two decades, a by-product of regulatory and technological change. This paper considers some of the implications of those changes for Canadian public policy. While no profound implications are found for Canadian macroeconomic policies, which probably reflects a long […]

  Content Type(s): Staff research, Technical reports Topic(s): International topics JEL Code(s): E, E5, E50, F, F3, F33, H, H3, H30

• Modelling Government Fiscal Behaviour in Canada

  Technical Report No. 34 Jack Selody, Kevin Lynch

  There are many models of fiscal policy in the economic literature and each has been based on a particular set of assumptions concerning the interaction of policy variables. However, even though these assumptions are critical to the behaviour of the models, there has as yet been no systematic attempt to test their validity or relative […]

  Content Type(s): Staff research, Technical reports Topic(s): Fiscal policy JEL Code(s): C, C5, C50, H, H3, H30, H6, H60