A Structural VAR Approach to Estimating Budget Balance Targets
AbstractThe Fiscal Responsibility Act 1994 states that, as a principle of responsible fiscal management, a New Zealand government should ensure total Crown debt is at a prudent level by ensuring total operating expenses do not exceed total operating revenues. In this paper a structural VAR model is estimated to evaluate the impact on the government's cash operating surplus (or budget balance) of four independent disturbances: supply, fiscal, real private demand, and nominal disturbances. Based on the distribution of these disturbances, stochastic simulations are undertaken to derive the level of the ex ante cash budget balance needed to achieve an actual cash budget balance, at a given level of probability, at some future time horizon.
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Bibliographic InfoPaper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 01/11.
Length: 32 pages
Date of creation: 2001
Date of revision:
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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
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Budget target; Fiscal policy; Fiscal Responsibility Act; Structural VAR; Stochastic Simulation;
Other versions of this item:
- Robert Buckle & Kunhong Kim & Julie Tam, 2002. "A structural var approach to estimating budget balance targets," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(2), pages 149-175.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-26 (All new papers)
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