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/Governmentbudget deficit

Governmentbudget surplus

The figure shows governmentpurchases, net governmentincome (taxes less transfersand interest), and the currentaccount balance for Canadafor the period 1961-2006.Government data are for fed-eral, provincial, territorial, andmunicipal governments, andeach series is measured as apercentage of GDP. The gov-ernment deficit (shaded area)is the difference between gov-ernment purchases and netreceipts. Note the twin deficitsduring almost the wholeperiod from 1975 to 1998.Since 1998 Canada has expe-rienced twin surpluses,

Source: Adapted from StatisticsCanada,CANSIMIIseriesv113713.v646937, v498327, v498332,v498316,andV4983~-------------

Current accountCurrent account SUrpIUS~ \

deficit \ ~

~'l-7V-------~-~./

-51961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 199720002003 2006

Year

Ft'ots~;••• ~""Ic" PMI"le

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Figun3.4Industrial-countIy saving and investment rates, 1982-91

11'1=0.09 +0.62SIY,(0.02) {0.09)

Table 2 FELDSTEIN-HORIOKA REGRESSIONS, IIY = a + fJ NS/y + £,

1990-1997"

No.ofobs. a f3 R2

All countries~ 56 0.15 0,41 0.33(0.02) (0.08)

Countries with GNP/cap. > 1000 48 0.13 0.48 0.39(0.02) (0.09)

Countries with GNP /c1i.p. > 2000 41 0.07 0.70 0.62(0.02) (0.09)

OECD countries' 24 0.08 0.60 0.68(0.02) (0.09)

"OLS regressions. Standard errors in parentheses. "IIsrael is excluded from an regressions in !hi! table. If Israel is added to the samples of size (56, 48, 41),the estimates of fJ are (0.39, 0.45,0.63).'If one adds Korea to the DECO saqtple, the estimate for fJ ~ to 0.76. Korea is included in "the larger

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