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Estimating New Zealand’s Structural Budget Balance WP 10/08

Publication Details

  • Estimating New Zealand's Structural Budget Balance
  • Published: 29 Nov 2010
  • Status: Current
  • Author: Parkyn, Oscar
  • JEL Classification: E62; H62
 

Estimating New Zealand’s Structural Budget Balance

Published: 29 Nov 2010

Author: Oscar Parkyn

Abstract

Existing methodologies for estimating a government’s structural budget balance are reviewed and applied to the case of New Zealand. Besides the conventional cyclical adjustment, an assessment is made of other possible non-structural elements to the budgetary position, including the terms of trade, asset prices and unbalanced growth. A key result is that the terms-of-trade boom, which began in the late 2000s, is associated with around 1% of GDP in tax revenues that may not be structural. Uncertainty surrounding cyclically-adjusted balance estimates is presented using fan charts.

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1 Introduction

2 Business cycle effects

3 Other structural factors

4 Uncertainty

5 New Zealand’s fiscal policy over history

6 Conclusion

References

Appendix 1: Econometric analysis of revenue windfalls and asset prices

Appendix 2: Fan chart data and methodology

twp10-08.pdf (561 KB) pp.i-iii,1–37

Acknowledgements

The author would like to acknowledge the valuable comments and/or assistance received from Christophe André, Anne-Marie Brook, John Janssen, Tim Hampton, Martin Keene, Michael Kirker, Simon McLoughlin, Renee Philip, Michael Reddell, Christie Smith, Kam Szeto and participants at a Treasury/RBNZ seminar. They have no responsibility for any errors contained within.

Disclaimer

The views, opinions, findings, and conclusions or recommendations expressed in this Working Paper are strictly those of the author. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in these working papers. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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