The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand
25 Pages Posted: 3 Jun 2010
Date Written: May 2010
Abstract
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.
Keywords: Current account balances, Current account deficits, Economic models, Fiscal policy, Government expenditures, New Zealand, Public sector savings, Tax reforms
Suggested Citation: Suggested Citation
Schule, Werner, The Potential Contribution of Fiscal Policy to Rebalancing and Growth in New Zealand (May 2010). IMF Working Paper No. 10/128, Available at SSRN: https://ssrn.com/abstract=1617027
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