An Analysis of the Demand for Government of Canada Marketable Debt

Abstract

<p>The primary objective of this thesis is to provide a systematic analysis of the Portfolio behaviour of the principal holders of Government of Canada securities, particularly insofar as these latter securities are concerned. The main non-government participants in the market for these securities are categorized as chartered banks, non-bank financial institutions, which are further subdivided into deposit-type and insurance-type institutions, and non-financial corporations. Si~ce institutional and legal considerations differ considerably with respect to their impact on the investment behaviour of the groups studied, these aspects are examined in varying degrees of detail for each group. Empirical evidence is examined to determine the changes in the portfolio structure of these institutions over time and regression analysis is used to isolate the principal determinants of the demand for Government of Canada securities on the part of each of the above-mentioned groups. To provide a theoretical basis for an assessment of the appropriate explanatory variables and the direction of influence of these variables, a model of portfolio behaviour is developed for the deposit-type institutions. The results of this analysis are used in the specification and interpretation of demand equations for federal government securities on the part of these institutions. The thesis commences by providing a background with respect to the characteristics of the public debt and the growth in the debt over time and concludes with a summary of the results reached in the main body of empirical analysis.</p>