The economic impact of the New Zealand fiscal stimulus package

James Giesecke, Chris Schilling

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    Abstract

    Unlike many countries affected by the global financial crisis, New Zealand did not announce a formal fiscal stimulus package. However, via a series of policy announcements beginning in October 2008, by March 2009 the government budget balance had moved towards deficit by 1.6 of 2011 GDP. We interpret this discretionary movement towards deficit as New Zealanda??s fiscal stimulus package. The package largely comprises three policies: cuts to personal income taxes, cuts to business taxes, and infrastructure spending. We investigate the individual and joint effects of these policies using a dynamic CGE model of the New Zealand economy. We find that the package has a small positive effect on short-run employment, but at a cost to long-run real consumption. We examine an alternative package, which generates a larger short-run employment gain, for a similar long-run real consumption cost.
    Original languageEnglish
    Pages (from-to)231 - 257
    Number of pages27
    JournalNew Zealand Economic Papers
    Volume44
    Issue number3
    DOIs
    Publication statusPublished - 2010

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