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An Empirical Investigation of Fiscal Policy in New Zealand - WP 06/08

Publication Details

  • An Empirical Investigation of Fiscal Policy in New Zealand
  • Published: Jul 2006
  • Status: Current
  • Authors: Claus, Iris; Gill, Aaron; Lee, Boram; McLellan, Nathan
  • JEL Classification: C32; E32; E62
  • Hard copy: Available in HTML and PDF formats only.
 

An empirical investigation of fiscal policy in New Zealand

New Zealand Treasury Working Paper 06/08

Published July 2006

Authors: Iris Claus, Aaron Gill, Boram Lee and Nathan McLellan

Abstract

This paper examines the effects of fiscal policy, measured by changes in government spending and net tax (government tax revenue less transfer payments), on New Zealand GDP. The framework of analysis is a structural vector autoregression (VAR) model of the New Zealand economy, employing and extending estimation techniques used by Blanchard and Perotti (2002). This model is then used to examine the dynamic effects of changes in government spending, taxes and transfers on GDP and the contributions of discretionary fiscal policy to New Zealand business cycles.

Contents

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Abstract

Table of Contents

List of Tables

List of Figures

List of Appendix Tables and Figures

1 Introduction

2 Model and data

3 Effects of fiscal policy

4 Sensitivity analysis

5 Contributions of fiscal policy to New Zealand business cycles

6 Conclusions

References

Appendix A: Augmented Dickey-Fuller unit root tests

Appendix B: Stability tests

Appendix C: Normality and linearity tests

Appendix D: Alternative ordering

Appendix E: Alternative elasticities

twp06-08.pdf (487 KB) pp. 1–36

List of Tables

List of Figures

List of Appendix Tables and Figures

Acknowledgements

We would like to thank Bob Buckle, Dasha Leonova, Renee Fry, Kam Szeto, and participants at a Workshop on Public Finance: Fiscal Indicators, Perugia (hosted by the Banca d‘Italia, 30 March-1 April 2006) for useful comments and suggestions.

Disclaimer

This document was commissioned by the New Zealand Treasury. However, the views, opinions, findings and conclusions or recommendations expressed in it are strictly those of the author(s), do not necessarily represent and should not be reported as those of the New Zealand Treasury. The New Zealand Treasury takes no responsibility for any errors, omissions in, or for the correctness of, the information contained in this paper.

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