Transcript Document 7632036

Canadian
Federal Debt
Analysis
Linda Elbagoury
Mr. Riegert
December 15, 2003
Pickering High School
MDM 4U1
Thesis
Determine which variable had the
greatest correlation with the
federal debt to project the state of
the economy.
Federal Debt Analysis
2
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 fu
Federal Debt Analysis
3
Quantitative Variables
Federal Debt
 Gross Domestic Product
 Exports
 Imports
 Trade Balance
 Revenue
 Expenditure
 Population
 Average Exchange Rate
Federal Debt Analysis
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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
Federal Debt Analysis
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Federal Debt
1980-2002
Federal Debt: Statistics Canada;
http://www.fin.gc.ca/purl/dmr-e.html
Federal Debt Analysis
Year
Dollars (in millions)
1980
92 555
1981
105 520
1982
140 270
1983
174 900
1984
204 870
1985
209 891
1986
245 151
1987
276 735
1988
305 438
1989
333 519
1990
362 920
1991
395 071
1992
428 682
1993
470 046
1994
513 219
1995
550 685
1996
578 718
1997
588 465
1998
579 369
1999
576 257
2000
563 396
2001
545 396
2002
536 489
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Federal Debt
650000
600000
550000
500000
Federal Debt
Dollars in millions
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
1978
1980
1982
Federal Debt Analysis
1984
1986
1988
1990
Year
1992
1994
1996
1998
2000
2002
2004
7
A Closer View of Federal Debt
1993-2002
600000
590000
580000
570000
Federal Debt
Dollars in millions
560000
550000
540000
530000
520000
510000
500000
490000
480000
470000
460000
450000
1992
1993
Federal Debt Analysis
1994
1995
1996
1997
Year
1998
1999
2000
2001
2002
2003
8
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/english/pgdb/econ/05.htm
Federal Debt Analysis
Year
Dollars in Millions
1993
724 243
1994
767 234
1995
806 846
1996
838 683
1997
884 583
1998
915 638
1999
975 284
2000
1 056 571
2001
1 040 388
2002
1 074 516
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Gross Domestic Product
1200000
Gross Domestic Product
Dollars in millions
1000000
800000
600000
400000
200000
0
1992
1993
Federal Debt Analysis
1994
1995
1996
1997
1998
Year
1999
2000
2001
2002
2003
10
A Closer View of Federal Debt & Gross Domestic Product
1150000
Federal Debt & Gross Domestic Product
Dollars in millions
1075000
1000000
925000
850000
775000
700000
625000
550000
475000
400000
1992
1993
1994
1995
1996
1997
1998
Year
Federal Debt Analysis
1999
2000
2001
2002
Federal Debt
GDP
2003
11
Impact of Gross Domestic Product on Federal Debt Graph
Outliers Removed
900000
Gross Domestic Product
Dollars in millions
850000
800000
y = 1.0508x + 229254
R2 = 0.9992
750000
700000
650000
Impact of GDP on Debt Graph
Linear (Impact of GDP on Debt Graph)
600000
400000
420000
Federal Debt Analysis
440000
460000
480000
500000
520000
Federal Debt
Dollars in millions
540000
560000
580000
600000
12
Exports
• Export – An international
transaction in which a
foreign currency is
converted into a domestic
one in order to purchase a
domestic good
Year
Dollars in Millions
1993
187 515
1994
225 679
1995
262 267
1996
275 819
1997
298 072
1998
318 444
1999
355 420
2000
413 195
2001
403 972
2002
396 318
Exports: Statistics Canada;
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
Federal Debt Analysis
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Impact of Exports on Federal Debt Graph
Outliers Removed
350000
300000
Exports
Dollars in millions
250000
200000
y = 0.8862x - 228869
R2 = 0.9861
150000
100000
Impact of Exports on Debt Graph
50000
Linear (Impact of Exports on Debt Graph)
0
300000
350000
Federal Debt Analysis
400000
450000
500000
Federal Debt
Dollars in millions
550000
600000
650000
14
Imports
• Import – An international
transaction in which a
domestic currency is
converted into a foreign
one in order to purchase
a foreign good
Year
Dollars in Millions
1993
169 953
1994
202 736
1995
225 553
1996
232 566
1997
272 946
1998
298 386
1999
320 409
2000
356 662
2001
343 076
2002
348 653
Imports: Statistics Canada;
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
Federal Debt Analysis
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Impact of Imports on Federal Debt
Outliers Removed
300000
Imports
Dollars in millions
250000
200000
y = 0.5893x - 103550
R2 = 0.9697
150000
100000
50000
0
300000
350000
400000
450000
500000
Federal Debt
Dollars in millions
Federal Debt Analysis
550000
600000
650000
Impact of Imports on Debt
Linear (Impact of Imports on
Debt)
16
Trade Balance
Trade Balance =
Exports – Imports
Trade Balance: Statistics Canada;
Year
Dollars in Millions
1993
17 562
1994
22 943
1995
36 714
1996
43 253
1997
25 126
1998
20 058
1999
35 011
2000
56 533
2001
60 896
2002
47 665
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
Federal Debt Analysis
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Impact of Trade Balance on Federal Debt
Outliers Removed
70000
60000
Trade Balance
Dollars in millions
50000
40000
30000
y = 0.2493x - 100419
R 2 = 0.9632
20000
10000
Impact of Trade Balance on Debt Graph
Linear (Impact of Trade Balance on Debt Graph)
0
400000
420000
Federal Debt Analysis
440000
460000
480000
500000
520000
Federal Debt
Dollars in millions
540000
560000
580000
600000
18
Federal Debt, Exports, Imports & Trade Balance at a Glance
700000
600000
Dollars in Millions
500000
400000
300000
200000
100000
0
1992
1993
1994
1995
1996
1997
1998
Year
Federal Debt Analysis
1999
2000
2001
2002
Federal Debt
Exports
Imports
Trade Balance
2003
19
Revenue
Year
Revenue in Millions
1998
385 460
1999
414 170
2000
445 311
2001
435 520
2002
440 746
Statistics Canada; Revenue, Expenditure, Deficit/Surplus
http://www.statcan.ca/english/Pgdb/govt01a.htm
Federal Debt Analysis
20
Impact of Revenue on Federal Debt
450000
440000
Revenue
Dollars in millions
430000
420000
410000
400000
390000
y = 0.4643x + 173427
R2 = 0.8426
380000
400000
420000
440000
460000
480000
500000
520000
540000
560000
580000
600000
Federal Debt
Dollars in millions
Impact of Revenue on Debt Graph
Linear (Impact of Revenue on Debt Graph)
Federal Debt Analysis
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Expenditure
Year
Expenditure in Millions
1998
387 438
1999
401 520
2000
422 656
2001
435 885
2002
440 006
Statistics Canada; Revenue, Expenditure, Deficit/Surplus
http://www.statcan.ca/english/Pgdb/govt01a.htm
Federal Debt Analysis
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Impact of Expenditure on Federal Debt
450000
440000
Expenditure
Dollars in millions
430000
420000
410000
400000
y = 0.4585x + 169833
R2 = 0.991
390000
Impact of Expenditure on Debt Graph
Linear (Impact of Expenditure on Debt Graph)
380000
300000
350000
Federal Debt Analysis
400000
450000
500000
Federal Debt
Dollars in millions
550000
600000
650000
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Population
Year
Estimated Population
1993
28 617 658
1994
28 939 211
1995
29 261 127
1996
29 577 439
1997
29 892 954
1998
30 168 395
1999
30 403 922
2000
30 689 126
2001
31 021 646
2002
31 629 765
Federal Debt Analysis
Statistics Canada; Estimated Population
http://www.statcan.ca/english/Pgdb/demo02.htm
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Population
32000000
31500000
Number of People
31000000
30500000
30000000
29500000
29000000
28500000
28000000
1992
1993
Federal Debt Analysis
1994
1995
1996
1997
1998
Year
1999
2000
2001
2002
25
2003
Revenue, Expenditure & Population Index
Dollars in Millions (Revenue and Expenditure)
Population Index = People/100
450000
430000
410000
390000
370000
350000
330000
310000
290000
270000
1998
1999
2000
Year
Federal Debt Analysis
2001
2002
Revenue
Expenditure
Population
26
Deficit or Surplus
1998-2002
Deficit or Surplus = Revenue Expenditure
Year
Deficit/Surplus in Millions
1998
-1 978
1999
12 650
2000
22 655
2001
-365
2002
740
Statistics Canada; Revenue, Expenditure, Deficit/Surplus
http://www.statcan.ca/english/Pgdb/govt01a.htm
Federal Debt Analysis
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Deficit or Surplus
(Revenue - Expenditure)
24000
22000
20000
18000
Dollars in Millions
16000
14000
12000
10000
8000
6000
4000
2000
0
1998
1999
2000
2001
2002
-2000
-4000
Federal Debt Analysis
Year
28
Average Exchange Rate
Year
Average Exchange Rate
(Canadian to U.S. Dollar)
1993
0.7755
1994
0.732391667
1995
0.728791667
1996
0.733433333
1997
0.7224
1998
0.674791667
1999
0.673183333
2000
0.67345
2001
0.645554545
2002
0.636916667
Federal Debt Analysis
Average Exchange Rate: Statistics Canada
http://www.fin.gc.ca/er/dmr-e.html
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Average Exchange Rate
(Canadian to US Dollar)
0.9
0.8
Exchange Rate
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
Federal Debt Analysis
30
Impact of the Average Exchange Rate on Federal Debt
900000
Average Exchange Rate*1000000
800000
700000
600000
y = -0.5075x + 978891
R2 = 0.1696
500000
400000
300000
200000
100000
Impact of the Average Exchange Rate and Debt
Linear (Impact of the Average Exchange Rate and Debt)
0
450000
470000
490000
510000
530000
550000
570000
590000
610000
Debt Dollars in millions
Federal Debt Analysis
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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
Federal Debt Analysis
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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
Federal Debt Analysis
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Federal Debt
Real GDP
Linear (Real GDP)
Poly. (Federal Debt)
The Impact of GDP on Federal Debt
1150000
1100000
Gross Domestic Product & Federal Debt
Dollars in millions
1050000
1000000
y = 40933x - 8E+07
R2 = 0.9798
950000
900000
850000
Notice the inverse
relationship between
the GDP & Debt from
1997-2002
800000
750000
700000
650000
600000
550000
500000
y = -4120.2x2 + 2E+07x - 2E+10
450000
400000
1992
2
R = 0.9618
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
Federal Debt Analysis
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Index
Year
Federal Debt
GDP
Index = Debt/GDP
(Expressed as a percentage)
1993
470 046
724 243
65%
1994
513 219
767 234
67%
1995
550 685
806 846
68%
1996
578 718
838 683
69%
1997
588 465
884 583
67%
1998
579 369
915 638
63%
1999
576 257
975 284
59%
2000
563 396
1 056 571
53%
2001
545 396
1 040 388
52%
2002
536 489
1 074 516
50%
Federal Debt Analysis
The lower the Index
value, the better the
state of the economy
35
Gross Domestic Product
575000
1000000
Dollars in Millions
1250000
550000
525000
750000
500000
500000
250000
475000
450000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
0
1992
2003
1993
1994
1995
1996
Year
1997
1998
1999
2000
2001
Year
Debt/GDP (as a percentage)
75%
70%
65%
Percentage
Dollars in Millions
Federal Debt
600000
60%
55%
50%
45%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
Federal Debt Analysis
36
2002
2003
Index = Debt/GDP
(as a percentage)
75%
70%
The state of the
economy is improving
from 1996 onward
Percentage
65%
60%
55%
50%
45%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
Federal Debt Analysis
37
CIBC
Debt-to-GDP Ratio
2003 Federal Budget: CIBC
http://research.cibcwm.com/economic_public/download/fbfeb03.pdf
Federal Debt Analysis
38
CIBC
Debt-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
Federal Debt Analysis
39
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
Federal Debt Analysis
40