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Public Debt Dynamics in New Zealand

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Abstract

This paper develops a framework to decompose the change in New Zealand’s public debt ratio into four component effects: the primary balance, real GDP growth, real interest rates, and exchange rates. We study New Zealand's debt dynamics over three periods: the decade after the Global Financial Crisis (2008 – 2018), the five-year forecasts (2019 – 2023), and the medium-term projections (2024 – 2033). We find asymmetry between the component effects of the debt dynamics on New Zealand's public debt ratio. The primary balance is the larger contributor to the public debt ratio (either positive or negative), while the automatic debt dynamics (the interest-growth differential and exchange rates) are relatively benign.

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  • Melissa Piscetek, 2019. "Public Debt Dynamics in New Zealand," Treasury Working Paper Series 19/01, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:19/01
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    File URL: https://treasury.govt.nz/sites/default/files/2019-07/twp19-01.pdf
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    Cited by:

    1. Yabesh Ombwori Kongo & Elvis Kimani Kiano & Joash Ogolla Ogada & Peter Isaboke Omboto, 2023. "The Effect of Debt Service Ratio and Exchange Rate on Public Debt Sustainability in Kenya," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 302-312, November.

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    Keywords

    Public debt; debt dynamics; fiscal policy; debt sustainability; fiscal sustainability;
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