Fiscal policy

• May 10, 1996

  Financing activities of provincial governments and their enterprises

  Bank of Canada Review - Spring 1996 Philip Wooldridge

  This article examines the changes that have occurred in the composition of funds raised by provincial borrowers during the 1990s. Higher financing requirements, coupled with the declining availability of funds from non-market sources such as the Canada Pension Plan, led provincial governments and their Crown corporations to broaden and to diversify their debt management programs. In particular, provincial borrowers expanded their presence in foreign bond markets, increased their issuance of floating-rate debt, and incorporated a wide variety of innovative debt instruments into their borrowing programs in order to minimize their borrowing costs and to manage the risks associated with the issuing of debt. As a result, the composition of funds raised by provincial borrowers during the 1990s differed markedly from that of the previous decade: between 1990 and 1995, provincial borrowing requirements were met almost entirely through the issuance of marketable debt, and net new foreign currency debt issues averaged nearly 50 per cent of funds raised, whereas between 1980 and 1989, non-market sources provided close to 30 per cent of funds raised, and net new foreign currency debt issues provided less than 20 per cent.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Debt management, Fiscal policy

• Government Debt and Deficits In Canada: A Macro Simulation Analysis

  Staff Working Paper 1995-4 Tiff Macklem, David Rose, Robert Tetlow

  This paper examines the macroeconomic implications of rising government debt in Canada and the short-run costs and long-run benefits of stemming the rise. The discussion begins with an evaluation of the long-run consequences of increasing government indebtedness, first based on the simple arithmetic of the government's long-run budget constraint, and then based on simulations of […]

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy
• 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

• Fiscal Policy and External Balance in the G-7 Countries

  Technical Report No. 60 Stephen S. Poloz

  This paper assesses evidence, from the G-7 countries, of a link between a country's fiscal policy and its external balance, often referred to as the "twin deficits" phenomenon. It begins by reviewing the stylized facts, and then examines the theoretical case for such a link.

  Content Type(s): Staff research, Technical reports Topic(s): Balance of payments and components, Fiscal policy, International topics JEL Code(s): F, F3, F32, F4, F41, H, H6, H60

• 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

• Les effets macroéconomiques des déficits budgétaires : résultats d'un modèle de simulation

  Technical Report No. 47 Pierre Duguay, Yves Rabeau

  An increase in a government deficit can have two effects: short-term stimulation of aggregate demand and employment, and long-term contraction of potential output. In this paper, these effects are illustrated using a dynamic, macroeconomic simulation model. The model is not a forecasting tool; it is intended to bridge the gap between Keynesian and supply-side economics […]

  Content Type(s): Staff research, Technical reports Topic(s): Economic models, Fiscal policy JEL Code(s): H, H6, H60

• Asset Stocks and the Use of Monetary and Fiscal Policies to Reduce Inflation

  Technical Report No. 35 Paul Masson

  This paper analyzes the dynamic behaviour of a country's economy under different policy regimes, by examining the cyclical effects that occur when certain intermediate macroeconomic targets are adopted. To highlight the differences in the adjustment paths that result, the study deliberately limits policy choice: either money supply or nominal income as targets, and either real […]

  Content Type(s): Staff research, Technical reports Topic(s): Fiscal policy, Inflation and prices, Monetary policy and uncertainty JEL Code(s): E, E3, E31, E6, E63

• 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