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An Introduction to the New Zealand Treasury Model

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Abstract

The Treasury is the New Zealand government’s lead advisor on economic and financial issues. Part of this advice consists of providing the government with forecasts of economic and fiscal variables. Economic forecasts are important, not only as a basis for forecasts of tax revenue, but also in informing the government of the macroeconomic environment in which proposed fiscal policy settings will operate. The New Zealand Treasury Model (NZTM) is an important part of the economic forecasting process at the Treasury. This paper has three purposes. The first is to give readers an idea of the key features of NZTM. The second is to detail major changes to the model since the last published documentation of the model (Szeto, 2002). These model developments have enhanced NZTM to provide more detailed forecasts. Key changes include the disaggregation of deflators into the various expenditure GDP components, the introduction of consumption and capital goods imports into the model (rather than just treating them as intermediate imports) and the disaggregation of the inflation equation into tradable and non-tradable components. The final purpose of this paper is to outline briefly NZTM’s role in the Treasury’s forecasting process.

Suggested Citation

  • Michael Ryan & Kam Leong Szeto, 2009. "An Introduction to the New Zealand Treasury Model," Treasury Working Paper Series 09/02, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:09/02
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    File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2009/09-02/twp09-02.pdf
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    References listed on IDEAS

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    1. Troy D. Matheson, 2006. "Factor Model Forecasts for New Zealand," International Journal of Central Banking, International Journal of Central Banking, vol. 2(2), May.
    2. Alan King, 1998. "Uncovered interest parity: New Zealand' s post-deregulation experience," Applied Financial Economics, Taylor & Francis Journals, vol. 8(5), pages 495-503.
    3. David Hargreaves & Hannah Kite & Bernard Hodgetts, 2006. "Modelling New Zealand inflation in a Phillips curve," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, September.
    4. W. E. G. Salter, 1959. "Internal And External Balance: The Role Op Price And Expenditure Effects," The Economic Record, The Economic Society of Australia, vol. 35(71), pages 226-238, August.
    5. Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, vol. 4(2), pages 177-185, May.
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    More about this item

    Keywords

    Computable general equilibrium model; New Zealand economy; forecasting;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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