IDEAS home Printed from https://ideas.repec.org/p/nzt/nztwps/99-03.html
   My bibliography  Save this paper

Sovereign Net Worth: An Analytical Framework

Author

Listed:
  • Simon Bradbury
  • Jim Brumby
  • David Skilling

Abstract

The Fiscal Responsibility Act requires the Crown to articulate targets for a series of fiscal variables, including net worth. Given the dramatic improvement in the fiscal position in recent years, a critical policy question relates to how (and which) measures of Crown net worth should be targeted. This paper sets out a framework for targeting Crown net worth. It does so by supplementing the GAAP-based measure with forward-looking information about spending and tax revenue. The paper argues that targeting net worth for the Crown requires the estimation of a path, rather than a static level.

Suggested Citation

  • Simon Bradbury & Jim Brumby & David Skilling, 1999. "Sovereign Net Worth: An Analytical Framework," Treasury Working Paper Series 99/03, New Zealand Treasury.
    • Handle: RePEc:nzt:nztwps:99/03
    as

    Download full text from publisher

    File URL: https://treasury.govt.nz/sites/default/files/2007-10/twp99-03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Armen Alchian & Susan Woodward, 1997. "The Firm is Dead; Long Live the Firm: A Review of Oliver E. Williamson's The Economic Institutions of Capitalism," Chapters, in: Svetozar Pejovich (ed.), The Economic Foundations of Property Rights, chapter 15, pages 206-220, Edward Elgar Publishing.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    5. Henning Bohn, "undated". "Budget Balance Through Revenue or Spending Adjustments ? Some Historical Evidence for the United States (Reprint 013)," Rodney L. White Center for Financial Research Working Papers 03-91, Wharton School Rodney L. White Center for Financial Research.
    6. Dehejia, Vivek H & Rowe, Nicholas, 1995. "The Laffer Curve and Precautionary Taxation: A Rationale for Paying Down the National Debt," Australian Economic Papers, Wiley Blackwell, vol. 34(65), pages 322-331, December.
    7. Alberto Alesina & Roberto Perotti, 1995. "Fiscal Expansions and Fiscal Adjustments in OECD Countries," NBER Working Papers 5214, National Bureau of Economic Research, Inc.
    8. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    9. Lucas, Robert Jr. & Stokey, Nancy L., 1983. "Optimal fiscal and monetary policy in an economy without capital," Journal of Monetary Economics, Elsevier, vol. 12(1), pages 55-93.
    10. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, December.
    11. Mankiw, N. Gregory, 1987. "The optimal collection of seigniorage : Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 20(2), pages 327-341, September.
    12. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1994. "Generational Accounting: A Meaningful Way to Evaluate Fiscal Policy," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 73-94, Winter.
    13. Bohn, Henning, 1991. "Budget balance through revenue or spending adjustments? : Some historical evidence for the United States," Journal of Monetary Economics, Elsevier, vol. 27(3), pages 333-359, June.
    14. Vivek H. Dehejia & Nicholas Rowe, 1992. "The Laffer Curve, Precautionary Taxation, and Paying Down the National Debt," Carleton Economic Papers 92-01, Carleton University, Department of Economics, revised Dec 1995.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Timothy C. Irwin, 2015. "Defining The Government'S Debt And Deficit," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 711-732, September.
    2. Peter Mikek, 2004. "Inflation targeting and switch of fiscal regime in New Zealand," Applied Economics, Taylor & Francis Journals, vol. 36(2), pages 165-172.
    3. John Stephenson & Grant Scobie, 2002. "The Economics of Population Ageing," Treasury Working Paper Series 02/04, New Zealand Treasury.
    4. Milesi-Ferretti, Gian Maria & Moriyama, Kenji, 2006. "Fiscal adjustment in EU countries: A balance sheet approach," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3281-3298, December.
    5. Nick Davis, 2001. "Does Crown Financial Portfolio Composition Matter?," Treasury Working Paper Series 01/34, New Zealand Treasury.
    6. Timothy Irwin & Oscar Parkyn, 2009. "Improving the Management of the Crown’s Exposure to Risk," Treasury Working Paper Series 09/06, New Zealand Treasury.
    7. Chew Ng & Bob Shead, 1999. "Measuring Governments’ Net Worth," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 6(4), pages 339-350.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nick Davis, 2001. "Does Crown Financial Portfolio Composition Matter?," Treasury Working Paper Series 01/34, New Zealand Treasury.
    2. Silika Prohl, 2010. "Test of Fiscal Sustainability and Causality Hypotheses for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(II), pages 481-506, June.
    3. A. Phiri, 2019. "Asymmetries in the revenue–expenditure nexus: new evidence from South Africa," Empirical Economics, Springer, vol. 56(5), pages 1515-1547, May.
    4. Agliardi, Elettra & Andergassen, Rainer, 2009. "Last resort gambles, risky debt and liquidation policy," Review of Financial Economics, Elsevier, vol. 18(3), pages 142-155, August.
    5. Gabriella Deborah Legrenzi & Costas Milas, 2010. "Spend-and-Tax Adjustments and the Sustainability of the Government's Intertemporal Budget Constraint," CESifo Working Paper Series 2926, CESifo.
    6. Jean-Bernard Chatelain, 2002. "Structural modelling of investment and financial constraints: Where do we stand?," Working Paper Research 28, National Bank of Belgium.
    7. Lane, Philip R., 2003. "The cyclical behaviour of fiscal policy: evidence from the OECD," Journal of Public Economics, Elsevier, vol. 87(12), pages 2661-2675, December.
    8. Alberto F. Alesina & Roberto Perotti, 1999. "Budget Deficits and Budget Institutions," NBER Chapters, in: Fiscal Institutions and Fiscal Performance, pages 13-36, National Bureau of Economic Research, Inc.
    9. Maurice Obstfeld, 1989. "Dynamic Seigniorage Theory: An Exploration," NBER Working Papers 2869, National Bureau of Economic Research, Inc.
    10. Banerjee, Joshua J., 2024. "Inflationary oil shocks, fiscal policy, and debt dynamics: New evidence from oil-importing OECD economies," Energy Economics, Elsevier, vol. 130(C).
    11. Szydlowski, Martin, 2019. "Incentives, project choice, and dynamic multitasking," Theoretical Economics, Econometric Society, vol. 14(3), July.
    12. Bart Lambrecht & Stewart C. Myers, 2005. "A Theory of Takeovers and Disinvestment," NBER Working Papers 11082, National Bureau of Economic Research, Inc.
    13. Ghartey, Edward E., 2008. "The budgetary process and economic growth: Empirical evidence of the Jamaican economy," Economic Modelling, Elsevier, vol. 25(6), pages 1128-1136, November.
    14. Henning Bohn, 2002. "Government asset and liability management in an era of vanishing public debt," Proceedings, Federal Reserve Bank of Cleveland, pages 887-940.
    15. Sahar Bahmani, 2007. "Do budget deficits follow a linear or non-linear path?," Economics Bulletin, AccessEcon, vol. 5(14), pages 1-9.
    16. Eric M. Leeper, 2010. "Monetary science, fiscal alchemy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 361-434.
    17. Hui Chen & Gustavo Manso, 2017. "Macroeconomic Risk and Debt Overhang," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 6(1), pages 1-38.
    18. Nordal, Kjell Bjørn, 2009. "A real options approach for evaluating the implementation of a risk-sensitive capital rule in banks," Review of Financial Economics, Elsevier, vol. 18(3), pages 132-141, August.
    19. Mr. Evan C Tanner & Issouf Samaké, 2006. "Probabilistic Sustainability of Public Debt: A Vector Autoregression Approach for Brazil, Mexico, and Turkey," IMF Working Papers 2006/295, International Monetary Fund.
    20. Nick Davis & Richard Fabling, 2002. "Population Ageing and the Efficiency of Fiscal Policy in New Zealand," Treasury Working Paper Series 02/11, New Zealand Treasury.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzt:nztwps:99/03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CSS I&T Web & Publishing, The Treasury (email available below). General contact details of provider: https://edirc.repec.org/data/tregvnz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.