@article{International:4239,
      recid = {4239},
      author = {Clinton, Kevin and Longworth, David},
      title = {The Economic Significance of Aspects of Canada's  International Payments},
      publisher = {Bank of Canada},
      address = {1982},
      pages = {1 online resource (viii, 25 pages)},
      abstract = {This study seeks to clarify a number of issues of current  concern that are related to the Canadian balance of  payments. These issues are analyzed within a theoretical  framework the essence of which is that, in the long run,  the balance of payments reflects savings, investment and  portfolio balance choices. In the short run, however,  exogenous shocks and the effects of business cycles may  exert a preponderant influence on particular components of  the balance of payments. Short-run equilibrium is achieved  in general by an induced movement of short-term capital  which may have implications for the exchange rate. In the  long run, current account deficits are not sustainable if  they correspond to declining net real domestic wealth per  capita. To judge whether this is the case, savings and  investment data are examined. Two adjustments should be  made to published savings, investment and balance of  payments data: removal of the inflation premium in net  interest payments, and inclusion of net retained earnings  of foreign firms as a payment. The adjusted data do not  suggest that the Canadian current account has been on a  trend towards unsustainably large deficits, since domestic  savings have remained relatively high. Another important  issue is the effect on the balance of payments of Canadian  takeovers of foreign-owned firms. Although it is too early  yet to say whether the repatriations in 1981 are likely to  yield a net national gain in the long run, published net  services payments will be increased for years unless the  real rate of return on equity is substantially above the  real interest rate. Finally, because the cyclical behaviour  of the balance of payments will vary depending upon the  underlying sources of the cycle, it does not seem advisable  to base macroeconomic policy on some target level of the  current account balance. Policies that foster appropriate  incentives for domestic saving and investment are more  likely to solve the basic problems than are measures  designed merely to alter transactions with non-residents.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/4239},
      doi = {https://doi.org/10.34989/tr-31},
}