Patrick Grady

Fiscal policy in Canada : an appraisal

This book provides an excellent systematic analysis of the macroeconomic effects of fiscal policy in Canada over the decade of the 1980s. The analysis focuses on changes in taxes rather than spending because of the greater degree of difficulty of analyzing expenditures on a program-byprogram basis. The unique feature of this study is its application of macroeconometric modelling techniques using the Forecasting and User Simulation Model (FOCUS) developed at the Institute for Policy Analysis of the University of Toronto. This provides a rigorous and consistent theoretical and empirical framework for examining the impact of fiscal policy changes and permits some interesting sensitivity analysis of the importance of key structural and policy parameters. The proper use of such a tool requires the skill and experience that Wilson and Dungan bring to the task as two of Canadas longest serving and most knowledgable model builders.

The Economic Consequences of Quebec Sovereignty@@@Parting as Friends: The Economic Consequences for Quebec

This paper reviews the issues that would arise if Quebec were to separate from Canada. It also presents quantitative estimates of the likely orders of magnitude of their economic impact both on Quebec and the Rest of Canada. Its overall conclusion is that Quebec would be much harder hit than the rest of Canada if Quebec separates. Real output in Quebec could easily be depressed in the short run by as much as 10 percent and in the long run by 5 percent. In the short run, the output loss would be triggered by a crisis of confidence resulting from separation. In the long run, output loss would be caused by the required transfer of resources to the foreign sector (necessitated by the elimination of the existing fiscal gain in transactions with the federal government), by the emigration of anglophones, and by higher public debt charges resulting from the increased debt burden. The transfer would be made more difficult by the need to ad just in the soft and dairy sectors and by the probable loss of Churchill Fallss power, but it could be facilitated by increased taxes. For the rest of Canada, the economic costs, which can be quantified, would be substantially lower than for Quebec. And for Canada there also would be some offsetting economic gains. The net short-run costs would only be about one to two percent of GDP and would result mainly from the short-run loss of confidence caused by the separation of Quebec. The long-run quantifiable costs would be small – probably less than the quantifiable benefits.

Was the 1979 Federal Budget Deficit Too Large? A Comment

In a recent issue of Canadian Public Policy Analyse de Politiques, J. Schaafsma (1980:556559) examined the magnitude of the federal budget deficit for 1979. The four main points which emerge from his analysis are: (1) There was an 11 per cent gap in 1979 between actual and full employment GNE.1 (2) The income elasticity of federal revenues, relative to federal expenditures, was 2.02. (3) The federal budget balance, calculated at full employment, indicated a small surplus in 1979.