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Canadian Retirement Savings Plans and the Foreign Property Rule

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Author Info
David Burgess
Joel Fried

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Abstract

This paper argues that the Foreign Property Rule (FPR), which limits the foreign content of a Registered Savings Plan to no more than 20 percent of book value, should be removed as quickly as possible. Given the globalization of financial markets, the FPR does not protect what it is meant to protect - a pool of savings for investment in Canada. Instead, it distorts the allocation of credit among firms, and forces agents to use more costly instruments - derivatives - to achieve desired foreign risk exposure. Since the FPR lowers the return on registered savings without benefiting any identifiable group, removing it would be an unequivocal gain to Canadians.

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File URL: http://economics.ca/cgi/jab?journal=cpp&view=v25n3/CPPv25n3p395.pdf
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Publisher Info
Article provided by University of Toronto Press in its journal Canadian Public Policy.

Volume (Year): 25 (1999)
Issue (Month): 3 (September)
Pages: 395-416
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Handle: RePEc:cpp:issued:v:25:y:1999:i:3:p:395-416

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. George H. Pink, 1989. "Government Restriction on Foreign Investment by Pension Funds: An Empirical Evaluation," Canadian Public Policy, University of Toronto Press, vol. 15(3), pages 300-312, September. [Downloadable!] (restricted)
  2. E.P. Davis, 1994. "An International Comparison of the Financing of Occupational Pensions," FMG Special Papers sp62, Financial Markets Group. [Downloadable!] (restricted)
    Other versions:
  3. Mehra, Rajnish & Prescott, Edward C., 1985. "The equity premium: A puzzle," Journal of Monetary Economics, Elsevier, vol. 15(2), pages 145-161, March. [Downloadable!] (restricted)
  4. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Jorion, Philippe & Schwartz, Eduardo, 1986. " Integration vs. Segmentation in the Canadian Stock Market," Journal of Finance, American Finance Association, vol. 41(3), pages 603-14, July. [Downloadable!] (restricted)
  6. Solnik, Bruno H., 1974. "An equilibrium model of the international capital market," Journal of Economic Theory, Elsevier, vol. 8(4), pages 500-524, August. [Downloadable!] (restricted)
  7. David Burgess & Joel Fried, 1998. "Canadian Tax Deferred Savings Plans and the Foreign Property Rule," UWO Department of Economics Working Papers 9806, University of Western Ontario, Department of Economics. [Downloadable!]
  8. Leonardo Bartolini & Allan Drazen, 1997. "Capital Account Liberalization as a Signal," NBER Working Papers 5725, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Joel Fried, 2005. "Elimination of the Foreign Property Rule on Tax Deferred Savings Plans," University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers 20055, University of Western Ontario, RBC Financial Group Economic Policy Research Institute. [Downloadable!]
  2. David Burgess & Joel Fried, 2004. "The Foreign Property Rule: A Cost-Benefit Analysis," University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers 20049, University of Western Ontario, RBC Financial Group Economic Policy Research Institute. [Downloadable!]
    Other versions:
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