The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand
May 1, 2010
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Summary
Simulations with the Fund’s GIMF model show that raising government savings in New Zealand permanently by 1 percent of GDP is likely to improve the current account balance by about ½ percent of GDP. The way government savings are achieved matters for GDP but little for the current account. However, results are sensitive to changes in the risk premium. Fiscally neutral changes in taxes and expenditures can raise output in the long run.
Subject: Consumption, Expenditure, Government consumption, Income, National accounts, Return on investment
Keywords: CA ratio, capital, Consumption, current account, deficit, GDP, GDP gain, Global, Government consumption, government consumption spending, government saving, Income, persistent current account deficit, Public savings, Return on investment, risk premium, saving, tax and expenditure reform, WP
Pages:
24
Volume:
2010
DOI:
Issue:
128
Series:
Working Paper No. 2010/128
Stock No:
WPIEA2010128
ISBN:
9781455200870
ISSN:
1018-5941
