Using Financial Market Information To Enhance Canadian Fiscal Policy

Huw Lloyd-Ellis and Xiaodong Zhu

No 1041, Working Paper from Economics Department, Queen's University

Abstract: In this article we argue that the evaluation and implementation of Canadian fiscal policy could be significantly improved through the systematic use of information provided by global financial markets. In particular, we show how the information contained in internationally traded asset returns can be used to (1) provide a more meaningful cyclical-adjustment of the budget deficit, (2) assess the sustainability of the public debt, and (3) reduce the risk of the debt becoming unsustainable without having to run excessively large surpluses.

Keywords: Public debt; cyclically-adjusted deficit; sustainability; hedging (search for similar items in EconPapers)
JEL-codes: G1 H6 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2004-08
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1041

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