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Accounting for Uncertainty in Public Debt Targets
Author(s) -
Fukač Martin,
Kirkby Robert
Publication year - 2017
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12208
Subject(s) - debt , economics , term (time) , offset (computer science) , contingency plan , fiscal policy , contingency , macroeconomics , measure (data warehouse) , computer science , linguistics , philosophy , physics , management , quantum mechanics , database , programming language
We use a semi‐structural fan‐chart approach to measure the changing nature of uncertainty for public debt targets in New Zealand. We find that economic and fiscal factors dominate the uncertainty landscape over the 3 year and longer time horizons. The near term tends to be dominated by non‐fundamental factors, such as measurement errors, that are typically outside of reasonable policy responses. We conclude that medium‐term fiscal targets are better placed to support macroeconomic stability than short‐term targets. We also quantify the fiscal buffers that may be needed to offset some of the future uncertainty, if policy‐makers choose to do so. The analysis is intended to support contingency planning in fiscal management and communication strategy of fiscal targets.