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


  • Werner Schule


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.

Suggested Citation

  • Werner Schule, 2010. "The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand," IMF Working Papers 10/128, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/128

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    References listed on IDEAS

    1. Kumhof, Michael & Laxton, Douglas, 2013. "Fiscal deficits and current account deficits," Journal of Economic Dynamics and Control, Elsevier, vol. 37(10), pages 2062-2082.
    2. 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.
    3. 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.
    4. Alexander Plekhanov & Manmohan S. Kumar & Daniel Leigh, 2007. "Fiscal Adjustments; Determinants and Macroeconomic Consequences," IMF Working Papers 07/178, International Monetary Fund.
    5. Douglas Laxton & Susanna Mursula & Michael Kumhof & Dirk V Muir, 2010. "The Global Integrated Monetary and Fiscal Model (GIMF) – Theoretical Structure," IMF Working Papers 10/34, International Monetary Fund.
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    Cited by:

    1. Ding Ding & Werner Schule & Yan M Sun, 2014. "Cross-Country Experience in Reducing Net Foreign Liabilities; Lessons for New Zealand," IMF Working Papers 14/62, International Monetary Fund.

    More about this item


    Current account; New Zealand; Public savings; tax and expenditure reform; risk premium; government spending; tax system; real interest rates; account deficits;

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