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The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand

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  • Werner Schule
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    Abstract

    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/128.

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    Length: 24
    Date of creation: 01 May 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/128

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    Related research

    Keywords: Current account balances; Economic models; Government expenditures; Public sector savings; Tax reforms; risk premium; government spending; tax system; real interest rates; account deficits; tax reform; public investment; interest payments; net foreign assets; tax cuts; investment spending; private capital; expenditure reform; foreign debt; fiscal model; aggregate demand; fiscal adjustment; fiscal deficits; taxation; fiscal deficit; public debt; foreign interest payments; private investment; tax rates; fiscal policy; public spending; composition of government expenditures; public finances; taxes on labor; external financing; fiscal contraction; fiscal outlook; increase in consumption; tax revenues; government deficit; composition of government expenditure; debt-service; tax labor; fiscal shock; fiscal position; fiscal structure; fiscal measure; fiscal accounts; tax rate; fiscal reform; reduction in transfers; fiscal adjustments; investors; capacity utilization; fiscal consolidation; spending cuts; tax increase; government expenditure; public investment spending;

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    References

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    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.:
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    1. Sebastian Edwards, 2006. "External Imbalances in an Advanced, Commodity-Exporting Country: The Case of New Zealand," NBER Working Papers 12620, National Bureau of Economic Research, Inc.
    2. Douglas Laxton & Susanna Mursula & Michael Kumhof & Dirk Muir, 2010. "The Global Integrated Monetary and Fiscal Model (GIMF)," IMF Working Papers 10/34, International Monetary Fund.
    3. Alexander Plekhanov & Manmohan S. Kumar & Daniel Leigh, 2007. "Fiscal Adjustments," IMF Working Papers 07/178, International Monetary Fund.
    4. Matthew Bell & Gary Blick & Oscar Parkyn & Paul Rodway & Polly Vowles, 2010. "Challenges and Choices: Modelling New Zealand’s Long-term Fiscal Position," Treasury Working Paper Series 10/01, New Zealand Treasury.
    5. Kumhof, Michael & Laxton, Douglas, 2013. "Fiscal deficits and current account deficits," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2062-2082.
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    Cited by:
    1. Ding Ding & Werner Schule & Yan Sun, 2014. "Cross-Country Experience in Reducing Net Foreign Liabilities: Lessons for New Zealand," IMF Working Papers 14/62, International Monetary Fund.

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