Upload
berniece-warner
View
220
Download
1
Embed Size (px)
Citation preview
CanadianCanadianFederal Debt AnalysisFederal Debt Analysis
Linda ElbagouryLinda Elbagoury
Mr. RiegertMr. Riegert
December 15, 2003December 15, 2003
Pickering High School Pickering High School
MDM 4U1MDM 4U1
Federal Debt Analysis 2
ThesisThesis
Determine which variable had the Determine which variable had the greatest correlation with the federal debt greatest correlation with the federal debt to to project the state of the economy.project the state of the economy.
Federal Debt Analysis 3
OverviewOverview
Investigate the variables involved in the Investigate the variables involved in the calculation of the federal debtcalculation of the federal debt
Discover which variable had the strongest Discover which variable had the strongest correlation with the federal debt to compose correlation with the federal debt to compose an index an index
Project the state of the federal debt for future yearsProject the state of the federal debt for future years
Federal Debt Analysis 4
Quantitative VariablesQuantitative Variables
Federal DebtFederal Debt Gross Domestic ProductGross Domestic Product ExportsExports ImportsImports Trade BalanceTrade Balance RevenueRevenue ExpenditureExpenditure PopulationPopulation Average Exchange RateAverage Exchange Rate
Federal Debt Analysis 5
Federal DebtFederal Debt
• The total amount that a government owes on The total amount that a government owes on money it has borrowed to fund deficit budgets money it has borrowed to fund deficit budgets in the pastin the past
Federal Debt Analysis 6
Federal DebtFederal Debt
1980-20021980-2002
Federal Debt: Statistics Canada;
http://www.fin.gc.ca/purl/dmr-e.html
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
Federal Debt Analysis 7
0
50000
100000
150000
200000
250000
300000
350000
400000
450000
500000
550000
600000
650000
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004
Year
Fe
dera
l Deb
tD
olla
rs in
mill
ionsFederal Debt
Federal Debt Analysis 8
450000
460000
470000
480000
490000
500000
510000
520000
530000
540000
550000
560000
570000
580000
590000
600000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Fed
eral
Deb
tD
olla
rs in
mill
ions
A Closer View of Federal Debt1993-2002
Federal Debt Analysis 9
Gross Domestic ProductGross Domestic Product
• The total value of all The total value of all final goods and final goods and services produced by services produced by an economy in a given an economy in a given yearyear
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
GDP: Statistics Canada;
http://www.statcan.ca/english/pgdb/econ/05.htm
Federal Debt Analysis 10
Gross Domestic Product
0
200000
400000
600000
800000
1000000
1200000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Gro
ss D
om
est
ic P
rod
uct
Do
llars
in m
illio
ns
Federal Debt Analysis 11
A Closer View of Federal Debt & Gross Domestic Product
400000
475000
550000
625000
700000
775000
850000
925000
1000000
1075000
1150000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Fed
eral
Deb
t & G
ross
Dom
estic
Pro
duct
Dol
lars
in m
illio
ns
Federal Debt
GDP
Federal Debt Analysis 12
Impact of Gross Domestic Product on Federal Debt GraphOutliers Removed
y = 1.0508x + 229254
R2 = 0.9992
600000
650000
700000
750000
800000
850000
900000
400000 420000 440000 460000 480000 500000 520000 540000 560000 580000 600000
Federal DebtDollars in millions
Gro
ss D
omes
tic P
rodu
ctD
olla
rs in
mill
ions
Impact of GDP on Debt Graph
Linear (Impact of GDP on Debt Graph)
Federal Debt Analysis 13
ExportsExports
• Export – An international Export – An international transaction in which a transaction in which a foreign currency is foreign currency is converted into a domestic converted into a domestic one in order to purchase a one in order to purchase a domestic gooddomestic good
Exports: Statistics Canada;
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
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
Federal Debt Analysis 14
Impact of Exports on Federal Debt GraphOutliers Removed
y = 0.8862x - 228869
R2 = 0.9861
0
50000
100000
150000
200000
250000
300000
350000
300000 350000 400000 450000 500000 550000 600000 650000
Federal DebtDollars in millions
Exp
orts
Dol
lars
in m
illio
ns
Impact of Exports on Debt Graph
Linear (Impact of Exports on Debt Graph)
Federal Debt Analysis 15
ImportsImports
• Import – An international Import – An international transaction in which a transaction in which a domestic currency is domestic currency is converted into a foreign converted into a foreign one in order to purchase a one in order to purchase a foreign goodforeign good
Imports: Statistics Canada;
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
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
Federal Debt Analysis 16
Impact of Imports on Federal DebtOutliers Removed
y = 0.5893x - 103550
R2 = 0.9697
0
50000
100000
150000
200000
250000
300000
300000 350000 400000 450000 500000 550000 600000 650000
Federal DebtDollars in millions
Impo
rts
Dol
lars
in m
illio
ns
Impact of Imports on Debt
Linear (Impact of Imports onDebt)
Federal Debt Analysis 17
Trade BalanceTrade Balance
Trade Balance: Statistics Canada;
http://strategis.icgc.ca/sc_mrkti/tdst/tdo/tdo.php#tag
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
Trade Balance =Trade Balance =
Exports – ImportsExports – Imports
Federal Debt Analysis 18
Impact of Trade Balance on Federal DebtOutliers Removed
y = 0.2493x - 100419
R2 = 0.9632
0
10000
20000
30000
40000
50000
60000
70000
400000 420000 440000 460000 480000 500000 520000 540000 560000 580000 600000
Federal DebtDollars in millions
Tra
de
Ba
lan
ce
Do
llars
in
mill
ion
s
Impact of Trade Balance on Debt Graph
Linear (Impact of Trade Balance on Debt Graph)
Federal Debt Analysis 19
Federal Debt, Exports, Imports & Trade Balance at a Glance
0
100000
200000
300000
400000
500000
600000
700000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Do
llars
in M
illio
ns
Federal DebtExportsImportsTrade Balance
Federal Debt Analysis 20
RevenueRevenue
Statistics Canada; Revenue, Expenditure, Deficit/Surplus
http://www.statcan.ca/english/Pgdb/govt01a.htm
Year Revenue in Millions
1998 385 460
1999 414 170
2000 445 311
2001 435 520
2002 440 746
Federal Debt Analysis 21
Impact of Revenue on Federal Debt
y = 0.4643x + 173427
R2 = 0.8426380000
390000
400000
410000
420000
430000
440000
450000
400000 420000 440000 460000 480000 500000 520000 540000 560000 580000 600000
Federal DebtDollars in millions
Rev
enue
Dol
lars
in m
illio
ns
Impact of Revenue on Debt Graph
Linear (Impact of Revenue on Debt Graph)
Federal Debt Analysis 22
ExpenditureExpenditure
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 23
Impact of Expenditure on Federal Debt
y = 0.4585x + 169833
R2 = 0.991
380000
390000
400000
410000
420000
430000
440000
450000
300000 350000 400000 450000 500000 550000 600000 650000Federal Debt
Dollars in millions
Exp
endi
ture
Dol
lars
in m
illio
ns
Impact of Expenditure on Debt Graph
Linear (Impact of Expenditure on Debt Graph)
Federal Debt Analysis 24
PopulationPopulation
Statistics Canada; Estimated Population
http://www.statcan.ca/english/Pgdb/demo02.htm
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 25
Population
28000000
28500000
29000000
29500000
30000000
30500000
31000000
31500000
32000000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Num
ber
of
Pe
opl
e
Federal Debt Analysis 26
Revenue, Expenditure & Population Index
270000
290000
310000
330000
350000
370000
390000
410000
430000
450000
1998 1999 2000 2001 2002
Year
Do
llars
in M
illio
ns (
Re
venu
e a
nd E
xpe
nditu
re)
Po
pul
atio
n In
de
x =
Pe
op
le/1
00
Revenue
Expenditure
Population
Federal Debt Analysis 27
Deficit or SurplusDeficit or Surplus1998-20021998-2002
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
Deficit or Surplus = Revenue - Deficit or Surplus = Revenue - ExpenditureExpenditure
Federal Debt Analysis 28
Deficit or Surplus(Revenue - Expenditure)
-4000
-2000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
22000
24000
1998 1999 2000 2001 2002
Year
Do
llars
in M
illio
ns
Federal Debt Analysis 29
Average Exchange RateAverage 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 0.636916667Average Exchange Rate: Statistics Canadahttp://www.fin.gc.ca/er/dmr-e.html
Federal Debt Analysis 30
Average Exchange Rate (Canadian to US Dollar)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Exc
hang
e R
ate
Federal Debt Analysis 31
Impact of the Average Exchange Rate on Federal Debt
y = -0.5075x + 978891
R2 = 0.1696
0
100000
200000
300000
400000
500000
600000
700000
800000
900000
450000 470000 490000 510000 530000 550000 570000 590000 610000
Debt Dollars in millions
Ave
rage
Exc
hang
e R
ate*
1000
000
Impact of the Average Exchange Rate and Debt
Linear (Impact of the Average Exchange Rate and Debt)
Federal Debt Analysis 32
Which variable had the highest Which variable had the highest residual (Rresidual (R22) value in correlation ) value in correlation
to the federal debt?to the federal debt?
A) ExportsA) Exports
B) Gross Domestic ProductB) Gross Domestic Product
C) ExpenditureC) Expenditure
D) ImportsD) Imports
E) RevenueE) Revenue
Federal Debt Analysis 33
AnswerAnswer
B) Gross Domestic ProductB) Gross Domestic Product
• RR22 value of 0.9992 value of 0.9992• The closer the residual The closer the residual value isvalue is to 1, the stronger the to 1, the stronger the correlationcorrelation of the data of the data
Federal Debt Analysis 34
The Impact of GDP on Federal Debt
y = 40933x - 8E+07
R2 = 0.9798
y = -4120.2x2 + 2E+07x - 2E+10
R2 = 0.9618400000
450000
500000
550000
600000
650000
700000
750000
800000
850000
900000
950000
1000000
1050000
1100000
1150000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003Year
Gro
ss D
om
est
ic P
rod
uct &
Fe
de
ral D
eb
tD
olla
rs in
mill
ions
Federal Debt
Real GDP
Linear (Real GDP)Poly. (Federal Debt)
Notice the inverse relationship between the GDP & Debt from 1997-2002
Notice the inverse relationship between the GDP & Debt from 1997-2002
Federal Debt Analysis 35
IndexIndexYear 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%
The lower the Index value, the better the state of the economy
The lower the Index value, the better the state of the economy
Federal Debt Analysis 36
45%
50%
55%
60%
65%
70%
75%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Pe
rce
nta
ge
0
250000
500000
750000
1000000
1250000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Do
llars
in M
illio
ns
450000
475000
500000
525000
550000
575000
600000
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Dol
lars
in M
illio
ns
Debt/GDP (as a percentage)
Federal Debt Gross Domestic Product
Federal Debt Analysis 37
45%
50%
55%
60%
65%
70%
75%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
Pe
rce
ntag
eIndex = Debt/GDP(as a percentage)
The state of the economy is improving from 1996 onward
The state of the economy is improving from 1996 onward
Federal Debt Analysis 38
CIBCCIBCDebt-to-GDP RatioDebt-to-GDP Ratio
2003 Federal Budget: CIBChttp://research.cibcwm.com/economic_public/download/fbfeb03.pdf
Federal Debt Analysis 39
CIBCCIBCDebt-to-GDP RatioDebt-to-GDP Ratio
• Measurement of the federal debt Measurement of the federal debt as a percentage of Canada's Gross as a percentage of Canada's Gross Domestic ProductDomestic Product
• Measure of the debt in relation to Measure of the debt in relation to thethe economy and of capacity to carry economy and of capacity to carry andand repay the debt repay the debt
Federal Debt Analysis 40
ConclusionsConclusions
The Gross Domestic Product in the Index had The Gross Domestic Product in the Index had the most correlation with the Federal Debtthe most correlation with the Federal Debt
The CIBC Debt-to-GDP Ratio confirmed that theThe CIBC Debt-to-GDP Ratio confirmed that the Gross Domestic Product in the Index had the greatest Gross Domestic Product in the Index had the greatest correlation with the Federal Debt correlation with the Federal Debt
According to the Index and the CIBC Debt-to-GDPAccording to the Index and the CIBC Debt-to-GDP Ratio, the state of the economy is improving and Ratio, the state of the economy is improving and forecasting a further reduction of the Debt in forecasting a further reduction of the Debt in future yearsfuture years