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Indicators of Fiscal Impulse for New Zealand

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Abstract

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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  • Renee Philip & John Janssen, 2002. "Indicators of Fiscal Impulse for New Zealand," Treasury Working Paper Series 02/30, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:02/30
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    File URL: https://treasury.govt.nz/sites/default/files/2007-09/twp02-30.pdf
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    Cited by:

    1. Lozano Luis Ignacio & Carolina Aristizábal, 2003. "Déficit público y desempeno económico en la década del noventa. El caso colombiano," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, September.
    2. Felicity C Barker & Robert A Buckle & Robert W St Clair, 2008. "Roles of Fiscal Policy in New Zealand," Treasury Working Paper Series 08/02, New Zealand Treasury.
    3. Miles Workman, 2015. "Estimating the Cyclically- and Absorption-adjusted Fiscal Balance for New Zealand," Treasury Working Paper Series 15/09, New Zealand Treasury.
    4. Iris Claus & Aaron Gill & Boram Lee & Nathan McLellan, 2006. "An empirical investigation of fiscal policy in New Zealand," Treasury Working Paper Series 06/08, New Zealand Treasury.
    5. Oscar Parkyn & Tugrul Vehbi, 2014. "The Effects of Fiscal Policy in New Zealand: Evidence from a VAR Model with Debt Constraints," The Economic Record, The Economic Society of Australia, vol. 90(290), pages 345-364, September.
    6. Anna Hamer-Adams & Martin Wong, 2018. "Quantifying fiscal multipliers in New Zealand: The evidence from SVAR models," Reserve Bank of New Zealand Analytical Notes series AN2018/05, Reserve Bank of New Zealand.
    7. Jamie Murray, 2013. "Parameter Uncertainty and the Fiscal Multiplier," Treasury Working Paper Series 13/19, New Zealand Treasury.

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    More about this item

    Keywords

    Fiscal impulse; cyclical-adjustment; aggregate demand; New Zealand.;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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