Does Financial and Goods Market Integration Matter for the External Balance? A Comparison of OECD Countries and Canadian Provinces

Large current account deficits have become a policy concern. The trend toward international capital market liberalization has improved access to foreign pools of saving which has allowed the expansion of current account deficits. There are minimal barriers to capital flows within a country, so an understanding of the determinants of within-country regional external balances could illustrate the likely path of external balances between countries as international economic integration proceeds. This study investigates the determinants of external balances for the regions within a single country— Canada—in order to provide a benchmark for country-level comparisons. The estimates show that the short run response of the external balance to disturbances, such as a deterioration in the terms of trade,is typically larger for Canadian provinces than for a sample of 18 OECD countries. The larger response at the regional level is consistent with greater financial market integration which facilitates the movement of capital and goods. The empirical results also reveal a much greater speed of adjustment of the external balance in the Canadian provinces. This faster adjustment speed, combined with the larger response of net exports, suggests that economic integration may promote the quicker resolution of external imbalances, but it may also allow larger deficits to emerge before they are addressed by market adjustments.current account; external balance; economic integration; financial market liberalization

External Balance Adjustment: An Intra-National and International Comparison

Large external imbalances have become a policy concern. This study investigates the determinants of external balances for regions within a single country — Canadian provinces — as well as for a sample of 18 OECD countries. External balance adjustment may differ for provinces since there are few intranational barriers to the mobility of capital, goods and labour within Canada. Also, because Canada is a monetary union, there is no currency risk associated with lending and borrowing across provinces, and this may promote inter-provincial financial flows. The estimates show that the short run response of the external balance to disturbances, such as a deterioration in the terms of trade, is typically larger for Canadian provinces than for OECD countries. There is also a much greater speed of adjustment of the external balance in the Canadian provinces. This faster adjustment speed, combined with the larger response of the external balance, means that provinces may see a quicker resolution of external imbalances, but larger deficits or surpluses may emerge before adjustment occurs.current account; external balance; global imbalances; currency union

Taxation and bond market investment strategies: Evidence from the market for Government of Canada bonds

This paper shows that, contrary to the suggestion of some investment advisors, for an individual Canadian investor subject to personal income taxation, the after-tax yield on a discount bond is always higher (or, at worse, equal) to the yield on a premium bond. This follows because the tax rate on capital gains is lower than the tax rate on coupon income in Canada. It is also shown that a decline in the capital gains tax rate raises the after-tax yield on discount bonds, but reduces the after-tax yield on premium bonds, and may even cause the yield on premium bonds to become negative. Further, a cut in the tax rate on interest income raises the after-tax yield on all bonds, but raises the yield on premium bonds relative to discount bonds. While the lower after-tax yields on higher coupon bonds might be expected to cause the pre-tax yields on these bonds to rise, no evidence of such tax capitalization is found using a large dataset of matched pairs of Government of Canada bonds for the period 1986-2006. The observed near equality of pre-tax yields since 1995 for bonds with different coupons implies that individuals in Canada earn a significantly smaller after-tax yield from holding premium bonds than discount bonds.taxation; bonds; after tax returns

Energy Prices and Alberta Government Revenue Volatility

Alberta government needs a revamped resource revenue stabilization fund to overcome the effects of wild swings in resource revenue and spending.Energy prices change substantially and unpredictably, causing revenue planning trouble for the Alberta government. Adjusting to these movements typically involves economic, social, and political costs that need to be factored into the government’s fiscal outlook. The best option for handling this is a resource revenue stabilization fund that collects a fixed proportion of resource revenue each year, and funds the provincial budget each year with a fixed share of the fund’s assets.Fiscal and Tax Competitiveness, Alberta, revenue volatility, resource revenue stabilization fund

Government Revenue Volatility in Alberta

The Alberta government is heavily exposed to energy price volatility as it relies to a great extent on revenue derived from the production of oil and natural gas. Energy prices change substantially and unpredictably, causing large and uncertain movements in revenues. Adjusting to these movements typically involves economic, social and political costs. Alberta government revenues are considerably more volatile than the revenues of other provinces, but Alberta’s own-source revenues less royalty payments are of similar size and volatility as those of other provinces. Several methods to reduce the volatility of revenues are assessed. An often-suggested method, tax base diversification (for example, use of a retail sales tax), is shown to have a minor effect on overall revenue volatility since Alberta’s royalty revenues are such a large share of total own-source revenues. Revenue smoothing using futures and options markets can be expensive, is associated with significant political risks, and cannot eliminate all revenue volatility. The Canadian dollar tends to appreciate (depreciate) when energy prices rise (fall), so exchange rate movements have smoothed Alberta government revenues, although not by a large amount. A simulation using Alberta data shows that a revenue savings fund could significantly reduce revenue volatility. This type of fund leads to greater revenue stability because the revenue it contributes to the budget in any particular year is based on revenues averaged over prior years. Revenue uncertainty is also reduced with a savings fund since future revenue depends on known past contributions.government revenue volatility; energy prices; tax base diversification; government savings fund

Investment and the exchange rate: Short run and long run aggregate and sector-level estimates

Aggregate and sector-level investment equations that incorporate the exchange rate are estimated for a panel of 17 OECD countries using an error correction methodology. A real currency depreciation is found to have a significant negative effect on aggregate investment in both the short run and the long run. This effect is negative in all sectors in the short run, is significant in six of nine sectors, and is particularly persistent in service sectors, sectors that do not generally benefit directly from an expansion of demand following a currency depreciation. Movements in another explanatory variable, the real wage, have an insignificant impact on investment in the short run in most sectors, but a rise in the real wage has a significant negative long run effect on aggregate investment and on investment in six of nine sectors. A simulation shows that movements in the real exchange rate and the real wage can explain a large proportion of cross-country differences in investment.investment; exchange rate

Book review: little Mogadishu: Eastleigh, Nairobi's global Somali hub by Neil Carrier

Constance Smith says that the publication of Neil Carrier's Little Mogadishu: Eastleigh, Nairobi's global Somali hub is timely and evocative demonstration of how great opportunity can emerge out of displacement

Book Review: Africa’s return migrants: The new developers? by Lisa Åkesson and Maria Eriksson Baaz (eds)

While Northern policy discourse and the national development policies of African countries focus on the economic value of returnee migration, the contributions in Africa’s Return Migrants: The New Developers? emphasise the role of social capital in managing a successful return, says Constance Smith

Master of Science

thesisDue to climate change concerns, governments and consumers are demanding higher environmental accountability for transportation fuels, particularly as related to carbon emissions. Wood-based energy markets have been proposed as a means to ensure sustainable forests, enhance energy security, promote environmental quality, and realize social benefits. Biomass crops may offset fossil fuels and reduce CO2 contributions to greenhouse gases while improving soil and water quality. Key issues among stakeholders include soil and water quality and loss of biodiversity as collecting small-diameter woody biomass may significantly alter post-timber harvesting landscapes. Little is known about how land use changes impact the entire ecological function of the watershed. The objectives of this study were to explore the potential of differences between land use changes and see if the water balance of the watershed would also change. This will help us understand the environmental impacts of different forms of biomass removal in the production of jet fuel. The start of holistic land management strategies focused on hydrologic implications of the entire food web has begun. Hydrologic measurements were collected from 28 one acre plots subject to different land treatments, analyzed, and compared to a site-specific water balance model UNSAT-H to evaluate if changes in biomass removal influence the subsurface hydrology. Results showed a correlation between compacted soils exhibiting more evaporation when compared to noncompacted sites. A correlation of less drainage to the water table correlates to a higher clay content value; this correlation did not exist, and was therefore not statistically significant. Since the soils had such unique characteristics at each plot, parameterization and extrapolation of the UNSAT-H model for the whole Pacific Northwest is not possible solely using the data of this LTSP site

From Zero to 1:1 in 30 Years - The Evolution of Digital Instructional Technology in a Suburban Kansas School District, 1984 - 2014

Digital instructional technology, those technologies used by teachers and/or students to assist with teaching and learning, continues to be an ever-changing and rapidly expanding integrated component in K-12 education in classrooms across the country. As school districts across the state and the country continue to wrestle with making fiscally-responsible decisions, there is a need to understand the influencing factors surrounding both the adoption and benefits of digital instructional technology use and the factors impacting decisions to use or not use these technologies. This case study exploration of digital instructional technology was guided by the central question: How has digital instructional technology evolved over time in a large suburban Kansas school district and what has influenced its adoption and use/nonuse? The primary findings of this study were: A) The current use of digital technologies adopted by the district over thirty years are varied; B) Equity, standardization, and financial feasibility contributed to the adoption of digital instructional technologies; C) Elements of external influences were noted throughout all of the user-defined eras with respect to the selection and adoption of digital instructional technologies; D) Teachers’ non-involvement with the decision-making process and their beliefs surrounding the benefits of digital instructional technologies may impact teachers’ frequency of use/nonuse, and E) Digital instructional technology adopted by this district has largely targeted improving teacher instruction as guided by various stakeholder priorities. This study contributes to the overall understanding of the evolution of digital instructional technology in one Kansas district over a defined period of time. It gives voice to the perspective of multiple stakeholders regarding the factors influencing the decision to adopt digital instructional technology. Additionally, it provides potential guidance for future district leaders with respect to making digital instructional technology selection and adoption decisions