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Indicators of Fiscal Impulse for New Zealand

  • Renee Philip
  • John Janssen

    ()

    (The Treasury)

Registered author(s):

    This paper defines fiscal impulse as a measure of whether government fiscal policy decisions are adding to, or subtracting from, aggregate demand pressures in the economy. When assessing the effects of fiscal policy on the economy it can be useful to have an approximate estimate of fiscal impulse. Estimates of fiscal impulse range from simple indicators based on fiscal aggregates, to more complicated approaches requiring greater use of judgement and economic theory. This paper develops reasonably simple indicators based on adjusted fiscal aggregates. It also sets out some sensitivity analysis. The indicators reflect intuitive assessments about changes in New Zealand fiscal policy over the last decade and looking forward into the forecast period. Although estimates are relatively insensitive to alternative assumptions, this is likely to be the result of the relative stability of the time period under consideration. Simple indicators of fiscal impulse have limitations. At best they can only provide an indication of the first round impact of changes in discretionary fiscal policy. A more complete assessment of the effects of fiscal policy on the economy requires a full-scale macroeconomic model, perhaps complemented with time series analysis.

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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2002/02-30/twp02-30.pdf
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    Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 02/30.

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    Length: 35 pages
    Date of creation: Dec 2002
    Date of revision:
    Handle: RePEc:nzt:nztwps:02/30
    Contact details of provider: 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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    1. Alan J. Auerbach & Daniel Feenberg, 2000. "The Significance of Federal Taxes as Automatic Stabilizers," NBER Working Papers 7662, National Bureau of Economic Research, Inc.
    2. repec:esr:chaptr:jacb200010 is not listed on IDEAS
    3. Julie Tam & Heather Kirkham, 2000. "Automatic Fiscal Stabilisers: Implications for New Zealand," Treasury Working Paper Series 01/10, New Zealand Treasury, revised 2001.
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    17. Professor Lars E O Svensson, 2001. "Independent review of the operation of monetary policy in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 64, March.
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    19. Nigel Andrew Chalk, 2002. "Structural Balances and All That; Which Indicators to Use in Assessing Fiscal Policy," IMF Working Papers 02/101, International Monetary Fund.
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