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Cross-Country Experience in Reducing Net Foreign Liabilities: Lessons for New Zealand Ding Ding

Cross-Country Experience in Reducing Net Foreign Liabilities: Lessons for New Zealand

Ding Ding

Published April 16th 2014
ISBN : 9781484353929
ebook
20 pages
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 About the Book 

This paper studies the dynamics of net foreign liabilities across a number of countries. Our historical analysis suggests that an orderly reduction in a countrys net foreign liabilities has mostly occurred when there was significant improvement inMoreThis paper studies the dynamics of net foreign liabilities across a number of countries. Our historical analysis suggests that an orderly reduction in a countrys net foreign liabilities has mostly occurred when there was significant improvement in gross public savings through deliberate fiscal consolidation measures. Simulations of a dynamic general equilibrium model calibrated for New Zealand indicates that sustained government deficit reduction could improve the countrys net foreign assets by about half of the accumulated public savings. However, given New Zealands relatively strong fiscal positions and previous work noting structurally low household savings, an orderly improvement in New Zealands external position in the medium term will depend on a structural improvement in private savings.