Abstract
The Conversion Loan of 1958: a simulation study of its macroeconomic consequences. Simulating with the RDx2 model of the Canadian economy, we establish the time pattern of the macroeconomic impacts of the 1958 Conversion Loan which doubled the average term to maturity of the federal debt. We find a maximum flow impact in 1960 of -1.6 per cent of real GNE, moderated by the accompanying price support programme to -1 per cent. The contractionary forces come from the decline in investment occasioned by the rise in the long rate. We find little impact through an appreciating exchange rate. We evaluate the prospects for a policy such as Operation Twist and find them quantitatively significant.
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