Ross Milbourne

Unemployment Insurance and Unemployment Dynamics

One of the puzzling features of the recent behavior of the Canadian unemployment rate is its persistence in the presence of a sustained expansion in real national income. Neither deficient aggregate demand nor a once-for-all, supply-side-induced increase in the natural rate provides a convincing explanation of this phenomenon. This paper presents a model that explains how aspects of unemployment insurance in Canada will cause persistence: unemployment will be highly serially correlated even if output is not. The authors document the increased persistence of the unemployment rate since 1977 and show that the model accounts for much of this phenomenon.

Growth, Capital Accumulation and Foreign Debt

This paper investigates the relationship between growth, population growth, capital accumulation and foreign debt. The paper uses an open economy neoclassical growth model to look at what macroeconomic forces explain why a number of countries accumulated (often unsustainable) debt and others did not. The author shows that a condition for debt stabilization relates the marginal propensity to consume out of wealth to the population growth rate and real rate of interest. The paper also shows that higher natural population growth must be associated with a higher level of net foreign debt per head, but that the same conclusion does not follow for higher rates of immigration, nor necessarily for higher rates of productivity growth. Finally, the paper characterizes a fiscal policy rule which if followed would prevent economies from entering debt traps following adverse shocks. Copyright 1997 by The London School of Economics and Political Science

How Informative are Preliminary Announcements of the Money Stock in Canada

We examine hypotheses about the relationship between provisional estimates and final values of M1, M2, and M3 and their growth rates in Canada, using monthly data and multiple revisions. Preliminary values cannot be viewed as final values plus an error (revision) uncorrelated with these but they are approximately unbiased forecasts of final values. The second difference in short-term interest rates is a leading indicator of revisions in M1 growth rates and revisions exhibit significant seasonality; hence preliminary values are not completely rational forecasts.