The Economic Opportunity Cost Of Capital For Canada - An Empirical Update

Chun-Yan Kuo and Glenn Jenkins ()
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Chun-Yan Kuo: Queen's University, Canada

No 1133, Working Paper from Economics Department, Queen's University

Abstract: The social or economic discount rate is the threshold rate used to calculate the net present value of an investment project, a program or a regulatory intervention to see whether the proposed expenditures are economically worthwhile to undertake. The size of the economic rate of discount has been a policy issue in Canada for many years. The debate has been primarily concerned with the empirical measurement of the economic opportunity cost of funds. The purpose of this paper is to reexamine and update the empirical estimation of what is the appropriate economic discount rate for Canada. The results suggest that estimates of the economic discount rate can range from 7.78 percent to 8.39 percent real. As a consequence, we conclude that for Canada an 8 percent real rate is an appropriate discount rate to use when calculating the economic net present value of the flows of economic benefits and costs over time.

Keywords: discount rates; opportunity cost; project evaluation (search for similar items in EconPapers)
JEL-codes: H43 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-07
New Economics Papers: this item is included in nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1133.pdf First version 2007 (application/pdf)

Related works:
Working Paper: The Economic Opportunity Cost of Capital for Canada - An Empirical Update (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1133

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