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Does Crown Financial Portfolio Composition Matter?

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Author Info
Nick Davis () (New Zealand Treasury)

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Abstract

This paper considers Crown financial portfolio composition from a welfare perspective. It argues that a broad definition of the Crown’s portfolio is required for analysing the welfare implications of portfolio composition. In practice, this means incorporating the present discounted value of tax and expenditure flows as well as traditional measures of assets and liabilities. Financial portfolio composition affects welfare for a number of reasons: imperfect and incomplete markets; distortionary taxes; externalities; and agency problems. There is unlikely to be a single policy objective for choosing the preferred portfolio composition that integrates all of those factors. However, it is argued that the Crown should be risk averse and aim to eliminate all diversifiable risk in its portfolio. There is a reasonable case for adopting a low-risk Crown portfolio. Importantly, that does not necessarily require a low-volatility financial portfolio.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2001/01-34/twp01-34.pdf
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Publisher Info
Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 01/34.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length: 22 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:nzt:nztwps:01/34

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Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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Related research
Keywords: Public Finance Portfolio Management

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Find related papers by JEL classification:
H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management

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. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Henning Bohn, . "Budget Balance Through Revenue or Spending Adjustments ? Some Historical Evidence for the United States (Reprint 013)," Rodney L. White Center for Financial Research Working Papers 3-91, Wharton School Rodney L. White Center for Financial Research.
    Other versions:
  3. Alchian, Armen A & Woodward, Susan L, 1988. "The Firm is Dead; Long Live the Firm: A Review of Oliver E. Williamson's The Economic Institutions of Capitalism," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 65-79, March. [Downloadable!] (restricted)
  4. Simon Bradbury & Jim Brumby & David Skilling, 1999. "Sovereign Net Worth: An Analytical Framework," Treasury Working Paper Series 99/03, New Zealand Treasury. [Downloadable!]
  5. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October. [Downloadable!] (restricted)
    Other versions:
  6. Stefano Athanasoulis & Robert Shiller & Eric van Wincoop, 1999. "Macro markets and financial security," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 21-39. [Downloadable!]
  7. Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-30, December. [Downloadable!] (restricted)
  8. Bohn, H., 1991. "Budget Balance Through Revenue or Spending Adjustments? Some Historical Evidence for the United States," Weiss Center Working Papers 3-91, Wharton School - Weiss Center for International Financial Research.
    Other versions:
  9. Missale, Alessandro, 1997. " Managing the Public Debt: The Optimal Taxation Approach," Journal of Economic Surveys, Blackwell Publishing, vol. 11(3), pages 235-65, September. [Downloadable!] (restricted)
  10. Nick Davis, . "Governance of Crown Financial Assets," Treasury Working Paper Series 98/02, New Zealand Treasury. [Downloadable!]
  11. Jeff Huther, 1999. "An Integrated Approach to Government Financial Policy," Treasury Working Paper Series 99/08, New Zealand Treasury. [Downloadable!]
  12. Jeff Huther, . "An Application of Portfolio Theory to New Zealand's Public Sector," Treasury Working Paper Series 98/04, New Zealand Treasury. [Downloadable!]
  13. Alesina, A. & Perotti, R., 1995. "Fiscal Expansions and Adjustments in OECD Countries," Discussion Papers 1995_25, Columbia University, Department of Economics.
  14. Kerryn Fowlie, 1999. "Automatic Fiscal Stabilisers," Treasury Working Paper Series 99/07, New Zealand Treasury. [Downloadable!]
  15. Campbell, John Y, 1996. "Understanding Risk and Return," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 298-345, April. [Downloadable!] (restricted)
    Other versions:
  16. Arthur Grimes, 2001. "Crown Financial Asset Management: Objectives and Practice," Treasury Working Paper Series 01/12, New Zealand Treasury. [Downloadable!]
  17. Arthur Grimes, 1992. "Optimal public debt structure," Pacific Basin Working Paper Series 93-04, Federal Reserve Bank of San Francisco.
Full references

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. Wilson Au-Yeung & Jason McDonald & Amanda Sayegh, 2006. "Australian Government Balance Sheet Management," NBER Working Papers 12302, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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