Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/205475 
Authors: 
Year of Publication: 
2001
Series/Report no.: 
New Zealand Treasury Working Paper No. 01/34
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
This paper considers Crown financial portfolio composition from a welfare perspective. It argues that a broad definition of the Crown's portfolio is required for analysing the welfare implications of portfolio composition. In practice, this means incorporating the present discounted value of tax and expenditure flows as well as traditional measures of assets and liabilities. Financial portfolio composition affects welfare for a number of reasons: imperfect and incomplete markets; distortionary taxes; externalities; and agency problems. There is unlikely to be a single policy objective for choosing the preferred portfolio composition that integrates all of those factors. However, it is argued that the Crown should be risk averse and aim to eliminate all diversifiable risk in its portfolio. There is a reasonable case for adopting a low-risk Crown portfolio. Importantly, that does not necessarily require a low-volatility financial portfolio.
Subjects: 
Public Finance
Portfolio Management
JEL: 
H11
H63
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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