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Long-term fiscal projections and their relationship with the intertemporal budget constraint: An application to New Zealand

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  • John Janssen

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    (The Treasury)

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    Abstract

    The fiscal gap calculates the change in fiscal policy settings needed to achieve a particular debt target at some point in the future. This working paper calculates fiscal gaps for New Zealand under a range of scenarios, including alternative spending growth, debt targets and interest rates. A positive (negative) fiscal gap indicates that a permanent increase (decrease) in the primary surplus is required to achieve a selected debt target in a particular terminal year. The scenarios suggest that under a range of alternative assumptions the fiscal gap out to 2051 is positive. These results are in accord with previous long-term fiscal projections, which, unlike the fiscal gap, have not been explicit about the nature of long-term fiscal imbalances. The analysis provides a platform for the further examination of potential long-term fiscal imbalances under a wider range of assumptions (e.g., around demographics, labour force participation, health spending) as well as alternative modelling techniques that allow for uncertainty.

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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2002/02-05/twp02-05.pdf
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    Bibliographic Info

    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 02/05.

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    Length: 35 pages
    Date of creation: Mar 2002
    Date of revision:
    Handle: RePEc:nzt:nztwps:02/05

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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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    Keywords: Long-term fiscal imbalance; intertemporal budget constraint;

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