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Determination of Quebec's Quarterly Real GDP and Analysis of the Business Cycle, 1948–1980

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Abstract

This study aims to consolidate the economic history of Quebec over the period from 1948 to 2019 with the emphasis on the period 1948–1980 for which we estimated the quarterly GDP for the province. Unlike previous economic studies relating to this period, we identify the chronology of the economic cycle of Quebec by estimating the real quarterly GDP by using the method of Ginsburgh (Appl Stat 22(3):368–374, 1973) as modified by De Carufel and Lizotte (in: Paper presented at Congrès de la Société canadienne de Science Économique, Montréal, 1982). Our analysis of the duration and intensity of recessions confirms the presence of regional cycles in Canada. Il shows also that the business cycle of Quebec is more strongly correlated with the US cycle than with the cycle in the rest of Canada for the period prior to 1980 and more correlated to the cycle of the rest of Canada onwards. We provide insights on why this trend changed over time.

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Fig. 1

Source Authors’ calculation. Episodes of potential recession are highlighted by red circles

Fig. 2

Source Authors’ calculation. Significant deflationary deviations are highlighted by the red circles

Fig. 3

Source Authors’ calculation in millions of dollars of 1980. Potential recessions are identified by shaded areas

Fig. 4

Source Authors’ calculation in millions of dollars of 1980. Potential recessions are identified by shaded areas

Fig. 5

Source Authors’ calculation

Fig. 6

Source Authors’ calculation

Fig. 7

Source Authors’ calculation

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Notes

  1. Many authors describing Quebec’s economic post WW2 history focus on the performance of two or three main periods, many the WW2 to pre quiet revolution period to the post quiet revolution (Geloso, 2017; Dean & Geloso, 2021; Fortin, 2001, 2011) and other such as Haddow (2015) focus on a comparative analysis of the evolution in Quebec and Ontario.

  2. This would implicitly imply that the Quebec economy would have stronger links to the North American economy compared to the rest of Canada.

  3. While their analysis is for the Canadian economy as a whole, the consequences are likely similar for the Quebec economy.

  4. Depending on the nature of the variables, aggregation consists of either summing the quarterly data or taking the average of the quarterly values.

  5. Data taken from https://statistique.quebec.ca/fr/document/comptes-economiques-du-quebec-trimestriels are seasonally adjusted expenditures in chained 2012 dollars. Our estimates of the real GDP for the period 1948–1980 is in 1981 real dollars. Both series can be made compatible after conversion using the ratio between the 2012 GDP deflator and the 1981 deflator.

  6. A deflationary gap occurs when the GDP is below its potential level.

  7. The jagged movements in the ROC's GDP are consistent with those for Canada as a whole, since Canada's real GDP in the fourth quarter of 1953 was 1.3 per cent higher than in the second quarter. Cross and Bergevin (2012) clearly considered other factors besides GDP to date the recession.

  8. For a longer period, Kollenz (2000) found no correlation between the sovereignty movement in Quebec and economic performance compared to Ontario and the ROC. Somers and Vaillancourt (2014) also find an absence of a statistical relation between the sovereignty threat and GDP between Ontario and Quebec.

  9. These papers mostly focus on the political reasons explaining Quebec’s strong support for NAFTA.

  10. Explaining the rise in support for Quebec’s sovereignty in the 1970s is, however, a multifaceted topic that lies well outside the scope of the current paper.

  11. The correlation difference test was performed on an online program offered by Lee and Preacher (2013) available at http://quantpsy.org/corrtest/corrtest2.htm.

  12. We refer here to the explanatory power of a regression with a single explanatory variable. We do not want to suggest that we should limit ourselves to a single factor or claim that US GDP is an exogenous shock, but simply to illustrate the consequences of the degree of correlation that we measure if it were to reflect the effect of exogenous variables. This stronger correlation is, in in all likelihood not unrelated to the use of US GDP in constructing the Quebec quarterly data. But nevertheless, this should not be taken as a methodology-induced result. Indeed, Canadian GDP was initially taken as an explanatory variable before being discarded because it was not statistically significant when US GDP was included. The causality is therefore rather the opposite. It is the relative weakness of the correlation of Quebec GDP with Canadian GDP that ultimately explains why US GDP and not Canadian GDP was used, among other variables, to create the quarterly data.

  13. Canada’s GDP is from Statistics Canada, Table 36-10-0104-01 while Quebec’s GDP is from Institut de la Statistique du Québec (2022), comptes économiques du Québec.

  14. That said, the transmission of the cycle through foreign trade is necessarily much stronger between provinces than between a US state and a Canadian province, since crossing the international border reduces the volume of trade by a factor of at least 20 as shown by Helliwell (1996). We did not find such estimates for pre-1980 period to see how if it may have change over time. However, his model forecasted that the new NAFTA deal signed in 1988 would increase the trade between both countries.

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Authors and Affiliations

  1. GREDI, École de Gestion, Université de Sherbrooke, Sherbrooke, Canada

    Mario Fortin

  2. Polytechnique Montréal et CIRANO, Montreal, Canada

    Marcelin Joanis

  3. Université du Québec à Rimouski, Rimouski, Canada

    Philippe Kabore

  4. AIRESS, Mohammed VI Polytechnic University, Rabat-Salé, Morocco

    Luc Savard

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  1. Mario Fortin
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  2. Marcelin Joanis
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  3. Philippe Kabore
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  4. Luc Savard
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Correspondence to Luc Savard.

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Appendices

Appendix 1

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Table 5 Estimated real GDP of Quebec and the ROC (in millions of 1981 Canadian dollars).
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5.

Appendix 2

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Table 6 Rate of change in Quebec's real GDP and ROC.
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6.

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Fortin, M., Joanis, M., Kabore, P. et al. Determination of Quebec's Quarterly Real GDP and Analysis of the Business Cycle, 1948–1980. J Bus Cycle Res 18, 261–288 (2022). https://doi.org/10.1007/s41549-022-00077-7

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