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You can visit this website to understand how worthwhile is the Canadian initiative of this policy. It explain you the Ontario budget in the year 2018-19 as compare to the year 2017-18. It is increased by the tremendous amount. It is also explained in the website that it went to $500 billion in 2026-2027 if everything going on proper track.

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A government that undertakes a commitment to target 2% CPI inflation does not, strictly speaking, "borrow in its own currency". Its bonds are an indirect promise to pay, via transversality transitivity (damn!), a specified quantity of CPI baskets of goods and services. In much the same way that bonds under the gold standard were an indirect promise to pay a specified quantity of gold. See my old post.

It is true nevertheless that a government whose bonds are promises to pay money that it itself prints, even if it targets 2% CPI inflation, cannot suffer a liquidity crisis. If there were a run on those bonds, where bondholders wanted to sell and hold money instead, the central bank could and would (to keep inflation on target) simply print as much extra money as people wanted to hold and use it to buy back the bonds they did not want to hold.

It cannot suffer a liquidity crisis, but it can nevertheless suffer a solvency crisis. The Magic Money Tree is real, but not very big. If we assume a currency/NGDP ratio of 5%, and Nominal GDP growing on average at 4% (2% Real GDP growth plus 2% inflation), the Magic Money Tree gives the government that owns the printing press profits worth 0.2% (=5%x4%) of GDP per year. Which isn't very big, and is already built into the government's budget anyway, as the profits from the central bank. In a solvency crisis the government would face a choice between defaulting on its bonds and defaulting on its commitment to not let inflation rise above 2%. Much like a government under the gold standard would face a choice between defaulting on its bonds and defaulting on its commitment to making its money worth a specified quantity of gold. But a solvency crisis like that could not coincide with a deficiency of Aggregate Demand where inflation threatens to fall below the 2% target. Instead it could coincide with an excess of Aggregate Demand, where inflation threatens to rise above the 2% target.

The above describes the Canadian Federal government.

Canadian Provincial governments are different. They do not "borrow in their own currency"; they can't pay their debts by printing money. They can suffer a liquidity crisis and/or a solvency crisis.

Canada is not like other countries. Canadian provinces play a big role fiscally, in taxing, spending, and borrowing. [Can anybody find that lovely graph I saw a few months ago showing Canada at the extreme end of the fiscal federalism measure?] Update: Thanks to Jim Sentance for pointing me to Kevin Milligan's post.

If you drew a line, with a unitary state at one end, and the Eurozone at the other end, Canada is halfway along that line. If you abolish the Federal government, leaving only the Bank of Canada, you get the Eurozone. Eurozone national governments are like Canadian provincial governments.

So what happened in the Eurozone could happen here, at the provincial level, even though it wouldn't be exactly the same. The biggest difference is that someone is in charge who can ultimately control both monetary and fiscal policy at the Federal level and decide who gets bailed out under what conditions.

I am not aware of any problems in the near and foreseeable future. But then I don't trust my foresight. And it may be a good idea to think through how we should respond to problems before they happen, and how we might reduce the probability that they do happen. Under what conditions should the Bank of Canada do a Draghi whatever it takes buying provincial government bonds?

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A government that undertakes a commitment to target 2% CPI inflation does not, strictly speaking, "borrow in its own currency". Its bonds are an indirect promise to pay, via transversality transitivity (damn!), a specified quantity of CPI baskets of goods and services.

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The picture says a lot, showing us the current condition of the Canadian economy which is under so much load of handling everything but is on a really thin ice and could collapse very quickly.

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A country's growth also depends upon it's competition in the global market so as long as our competitors economy does not grow up it is very unlikely for our economy to do so as well. So that's what this video is about. They both are discussing on the factor of competition on the economic growth and why should we fer about it.

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Peter MacKay: 'I fear for the Canadian economy' if competitiveness doesn't improve

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By Arjun Chadha and Shivam Dutta.

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For those who do not understand the Fiscal Policy quite right you can watch this video. This video briefly explains the definition of Fiscal Policy how the governments uses it to control the macroeconomics. How this was originated and it's stimulus. The Fiscal policy helps the government to collect money by changing the amount of taxes and the money that is collected is used but sometimes it is not.

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Fiscal Policy and Stimulus: Crash Course Economics #8

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This page focuses on the Canadian Fiscal Policy, we have added some videos and web pages for everyone to know about your policy

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This news report is really good, it was hosted by the CBC news network in which they have got together some officials from different provinces to talk about the issues with the Fiscal plan and why did it fail so badly. The budget had been the same as it was under the last party and there has been no progress that we were promised. So check this video out. It has been really interesting to find out the real issues.

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The fallout from Canada's fiscal plan | At Issue

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The web page lets us know all about the Canadian Fiscal policy. What are its benefits and how is it controlled by the government. The article also takes us to the other approach how this policy is opposed by many economists, they think that if the government increases the taxes then the private borrowing and lending company would also increase there taxes. We are also shown the evolution of the Fiscal policy from the very beginning to right now.

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Fiscal Policy | The Canadian Encyclopedia

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History, politics, arts, science & more: the Canadian Encyclopedia is your reference on Canada. Articles, timelines & resources for teachers, students & public.

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The article tells us about the shift in the fiscal policy since the last elections. When the liberal party was elected they created a new fiscal policy and stimulus to increase the country budget but it did not go that well. They promised to increase the budget by up to 100 billion Canadian dollars but we can't see that happening what is the reason.

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After nearly a decade of fiscal policy taking a back seat to monetary policy, the newly elected Liberal Government moved public spending into the driver's seat with its first budget since the election last October. Canada will now use fiscal deficits to reinvigorate its limping economy. It has launched a policy of fiscal stimulus, led by large infrastructure investment for at least the next five years. While the political analysts argue as to which election promises were kept and which were broken, the principle issue in the budget concerns the role of deficits in generating economic well-being.

Deficit financing has been used in Canada several times over the past four decades, as successive governments contended with economic downturns (Chart 1). Recovering from the severe recession of 1980-82 and again in 1991-93, Canada ran very large deficits - in excess of 4% of GDP. From 1997 to 2008, government finances returned to the black, only to be hit hard with the 2008 global crisis, necessitating a return to deficits in the order of 3% of GDP. That deficit position was ultimately eliminated by 2014-15.

Once again, Canada faces a very difficult economic environment and now turns to deficit financing to clear a path towards higher economic growth.

When the election was called in the summer of 2015, the Liberal Party advocated deficit spending and proposed a deficit of C$10 billion in the first year. By the time the budget was delivered on March 22, 2016, the forecasted deficit was increased to C$29 billion and the Government planned to run up a total C$100 billion in deficits over the next five years. What happened in the interim between the election call and the budget delivery?

According to Finance Canada documents, surveys of private sector economists taken in June 2014, indicated a relatively robust growth path. (Chart 2). However, the collapse in the commodity markets changed everything. Forecasts were significantly lowered for nominal growth GDP, by as much as 7% for 2017. The original deficit projections could no longer be justified.

The principal culprit was the severe drop in investment plans in the energy sector and its knock-on effects for the rest of the economy. Industrial sectors, outside of the energy-producing provinces, were suffering a decline in nominal incomes. Overall, capital investment in Canada has been on a decline for several years, and the collapse of commodity prices has only served to accentuate that decline. No longer can we count on the commodity sector to sustain economic growth.

Canadian governments at all levels have made considerable strides in reducing debt ratios over the past 25 years. Chart 3 traces the debt-to-GDP ratio for all governments over that period. The ratio has declined from nearly 90% in the mid-1990s to under 50% today. As the deficit ratio fell, the bond rating agencies raised Canada's ratings and today the country enjoys one of the highest ratings in the G-7 countries. Within the Federal sphere, the debt-to-GDP ratio has fallen from nearly 70% in the 1990s to just over 30% today. The 2016 budget projections expect that ratio to continue over the planning time horizon.

Starting in 2016-17, the deficit will be financed by a record issuance of C$133 billion of which C$92 billion is rolling over old debt from the previous borrowings and the balance represents the deficit to be financed this coming fiscal year. Interestingly, Finance Canada recommends issuing bonds in the two-, three-, and five-year borrowing periods, rather than locking into low rates for 10 - and 30-year bonds.

One could argue that, given that much of the deficit arises from infrastructure investment, they should be financing with long-term rates, which are at historic lows. However, if the goal is to return to a balanced budget at the end of five years, then using short-term rates seems appropriate. This was the strategy of the Harper government as it sought to return to a balanced budget by 2015. Either way, today's borrowing costs affords an opportunity to expand the budget without measurably adding to the burden of interest costs.

Turning to Table 1, the outstanding Federal debt will be increased by C$113 billion over the period. Nonetheless, the debt as a percent of GDP remains static at approximately 30% throughout the period. And, more importantly, interest costs as a percent of total revenues marginally increase from 8.8% in 2016-17 to 10.3% in 2021. Both measures suggest that the Federal debt position is sustainable and does not impinge on the expansion of programs designed to stimulate the economy.

In the past, Canada has relied on foreign capital inflows to help finance its public sector deficits. Given the Federal Government's sound bond rating and also that Canada offers competitive interest rates - certainly higher than those in Europe or Japan - there is every reason to expect that the international investing community will look favourably upon future bond issuances.

The budget has prompted many forecasters to reassess their earlier growth projections. TD Canada and BAML both bumped up their forecasts for 2016 and 2017 on the strength of the proposed budget. It is no secret that the Bank of Canada has had its hand stayed, awaiting Federal budget. This level of deficit spending will be welcomed by the Bank as a tool to augment its accommodating monetary policy. The central bank estimates growth of 1.4 percent in 2016 and 2.4 percent in 2017, in the absence of fiscal stimulus. At least, the Bank now finds it has a partner in promoting economic growth.

A final word. With the EU countries under austerity regimes and the US operating with a relatively non-expansionary Federal budget, Canada now embarks upon a program of deficit financing to counter its problems of slow growth. It will be of interest to many other nations to see if this strategy is what is needed to pull out of the current weak economic environment.

Disclosure: No positions

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After nearly a decade of fiscal policy taking a back seat to monetary policy, the newly elected Liberal Government moved public spending into the driver's seat with its first budget since the election last October. Canada will now use fiscal deficits to reinvigorate its limping economy.

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Fiscal policy types, Objective and Tools

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Fiscal policy types, Objective and Tools

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This picture present us the types of fiscal policy which are Expansionary fiscal policy and Contractionary fiscal policy. This picture represents the fiscal policy types which are same in all the countries. In Expansionary, the government spending is high and taxes are less and vice versa in case of Contractionary fiscal policy

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This picture shows the comparison between the Fiscal growth of Canada and USA in the present Fiscal year. As we can see the budget for Canada has increased a fair deal of amount from the last year to this year.