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Crown Financial Asset Management: Objectives and Practice


  • Arthur Grimes

    (Institute of Policy Studies, Victoria University of Wellington)


This paper analyses key issues that may be relevant to setting the Crown's overall objectives and practices for financial asset and liability management. It examines implications of the nature of the Crown's balance sheet for asset and liability management and investigates the appropriate approach of the Crown towards managing risk (concluding that a risk averse approach is warranted). The issue of centralisation versus decentralisation of Crown asset and liability management is analysed both from a portfolio management perspective and from an organisational design perspective. Insights from private sector financial conglomerates are also incorporated. The paper concludes that individual Crown financial entities should each continue to be responsible for setting their own strategic asset allocation, after taking into account the nature of their liabilities. A central Crown body should, however, monitor and aggregate information from each of these entities and be delegated the responsibility and power to manage risks to the overall Crown balance sheet.

Suggested Citation

  • Arthur Grimes, 2001. "Crown Financial Asset Management: Objectives and Practice," Treasury Working Paper Series 01/12, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:01/12

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    References listed on IDEAS

    1. Fisher, Lance A. & Fackler, Paul L. & Orden, David, 1995. "Long-run identifying restrictions for an error-correction model of New Zealand money, prices and output," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 127-147, February.
    2. Christopher A. Sims, 1986. "Are forecasting models usable for policy analysis?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-16.
    3. Fisher, Lance A, 1996. "Sources of Exchange Rate and Price Level Fluctuations in Two Commodity Exporting Countries: Australia and New Zealand," The Economic Record, The Economic Society of Australia, vol. 72(219), pages 345-358, December.
    4. John B. Taylor, 2000. "Reassessing Discretionary Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 21-36, Summer.
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    6. Buti, Marco & Franco, Daniele & Ongena, Hedwig, 1998. "Fiscal Discipline and Flexibility in EMU: The Implementation of the Stability and Growth Pact," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 81-97, Autumn.
    7. Bernanke, Ben S., 1986. "Alternative explanations of the money-income correlation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 49-99, January.
    8. Jordi GalĂ­, 1992. "How Well Does The IS-LM Model Fit Postwar U. S. Data?," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 709-738.
    9. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
    10. Thomas Dalsgaard & Alain de Serres, 1999. "Estimating Prudent Budgetary Margins for 11 EU Countries: A Simulated SVAR Model Approach," OECD Economics Department Working Papers 216, OECD Publishing.
    11. Paul Conway, 1998. "Macroeconomic variability in New Zealand: An SVAR study," New Zealand Economic Papers, Taylor & Francis Journals, vol. 32(2), pages 161-186.
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    Cited by:

    1. Nick Davis, 2001. "Does Crown Financial Portfolio Composition Matter?," Treasury Working Paper Series 01/34, New Zealand Treasury.
    2. Wilson Au-Yeung & Jason McDonald & Amanda Sayegh, 2006. "Australian Government Balance Sheet Management," NBER Working Papers 12302, National Bureau of Economic Research, Inc.
    3. Craig Fookes, 2011. "Modelling Shocks to New Zealand's Fiscal Position," Treasury Working Paper Series 11/02, New Zealand Treasury.
    4. Udaibir S. Das & Yinqiu Lu & Michael G. Papaioannou & Iva Petrova, 2013. "Sovereign Risk and Asset and Liability Management—Conceptual Issues," Journal of Reviews on Global Economics, Lifescience Global, vol. 2, pages 330-355.
    5. Eric Hansen, 2003. "Objectives, Targets and Instruments for Crown Financial Policy," Treasury Working Paper Series 03/21, New Zealand Treasury.

    More about this item


    Crown balance sheet; Public debt management;

    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; Sovereign Debt

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