Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205411
Authors: 
Huther, Jeff
Year of Publication: 
1999
Series/Report no.: 
New Zealand Treasury Working Paper No. 99/08
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
In this paper, I address three questions of government financial policy: how should a government's aversion to financial risk be determined, when are new financial investments justified, and what is the optimal level of reserves in a flexible exchange rate regime. To answer these questions, I modify an integrated financial model developed by Froot and Stein (1998) to describe private sector financial policy. Financial risk aversion in this model is due to the potential of poor financial returns limiting an institution's future investment opportunities. The potential for poor returns provides governments with incentives to hold reserves and limit new financial investments.
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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