Canadian Federal Debt Analysis

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CanadianFederal Debt Analysis

• Linda Elbagoury
• Mr. Riegert
• December 15, 2003
• Pickering High School
• MDM 4U1

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Thesis

• Determine which variable had the greatest
  correlation with the federal debt to project the
  state of the economy.

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Overview

• Investigate the variables involved in the
  calculation of the federal debt

• Discover which variable had the strongest
  correlation with the federal debt to compose
  an index

• Project the state of the federal debt for future
  years

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Quantitative Variables

• Federal Debt
• Gross Domestic Product
• Exports
• Imports
• Trade Balance
• Revenue
• Expenditure
• Population
• Average Exchange Rate

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Federal Debt

• The total amount that a government owes on money
  it has borrowed to fund deficit budgets in the
  past

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Federal Debt 1980-2002
Federal Debt Statistics Canada http//www.fin.gc
.ca/purl/dmr-e.html
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Federal Debt
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A Closer View of Federal Debt1993-2002
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Gross Domestic Product

• The total value of all final goods and services
  produced by an economy in a given year

GDP Statistics Canada http//www.statcan.ca/engl
ish/pgdb/econ/05.htm
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Exports

• Export An international transaction in which a
  foreign currency is converted into a domestic one
  in order to purchase a domestic good

Exports Statistics Canada http//strategis.icgc.
ca/sc_mrkti/tdst/tdo/tdo.phptag
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Imports

• Import An international transaction in which a
  domestic currency is converted into a foreign one
  in order to purchase a foreign good

Imports Statistics Canada http//strategis.icgc.
ca/sc_mrkti/tdst/tdo/tdo.phptag
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Trade Balance
Trade Balance Exports Imports
Trade Balance Statistics Canada http//strategis
.icgc.ca/sc_mrkti/tdst/tdo/tdo.phptag
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Revenue
Statistics Canada Revenue, Expenditure,
Deficit/Surplus http//www.statcan.ca/english/Pgdb
/govt01a.htm
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Expenditure
Statistics Canada Revenue, Expenditure,
Deficit/Surplus http//www.statcan.ca/english/Pgdb
/govt01a.htm
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Population
Statistics Canada Estimated Population http//www
.statcan.ca/english/Pgdb/demo02.htm
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Deficit or Surplus1998-2002
Deficit or Surplus Revenue - Expenditure
Statistics Canada Revenue, Expenditure,
Deficit/Surplus http//www.statcan.ca/english/Pgdb
/govt01a.htm
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Average Exchange Rate
Average Exchange Rate Statistics
Canadahttp//www.fin.gc.ca/er/dmr-e.html
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Which variable had the highest residual (R2)
value in correlation to the federal debt?

• A) Exports
• B) Gross Domestic Product
• C) Expenditure
• D) Imports
• E) Revenue

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Answer

• B) Gross Domestic Product

• R2 value of 0.9992

• The closer the residual value is to 1, the
  stronger the correlation of the data

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Notice the inverse relationship between the GDP
Debt from 1997-2002
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Index
The lower the Index value, the better the state
of the economy
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Federal Debt
Gross Domestic Product
Debt/GDP (as a percentage)
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Index Debt/GDP(as a percentage)
The state of the economy is improving from 1996
onward
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CIBCDebt-to-GDP Ratio
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CIBCDebt-to-GDP Ratio

• Measurement of the federal debt as a percentage
  of Canada's Gross Domestic Product

• Measure of the debt in relation to the economy
  and of capacity to carry and repay the debt

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Conclusions

• The Gross Domestic Product in the Index had the
  most correlation with the Federal Debt

• The CIBC Debt-to-GDP Ratio confirmed that the
  Gross Domestic Product in the Index had the
  greatest correlation with the Federal Debt

• According to the Index and the CIBC Debt-to-GDP
  Ratio, the state of the economy is improving
  and forecasting a further reduction of the
  Debt in future years