The Treasury has published today three new papers covering policy analysis modelling tools, National Accounts categorisation of COVID-19 funding allocation and expenditure, and key themes from the Treasury’s Productivity in a Changing World lecture series.

• Murat Özbilgin and Robert Kirkby, Solving Stochastic OLG Models Using Chebyshev Parameterized Expectations (WP 24/03). There is growing emphasis on understanding how economic policies impact not only economic efficiency but also the distribution of benefits and costs across society. Stochastic overlapping generations (S-OLG) models are key tools for analyzing policies that have repercussions for various generations and groups. However, the primary challenge in using S-OLG models lies in the computational difficulties associated with solving them to reach equilibrium outcomes and conduct policy experiments. This paper demonstrates the application of Chebyshev polynomials in conjunction with the Parameterized Expectations Algorithm (C-PEA) as a solution method for S-OLG models. The findings indicate that C-PEA can be a valuable tool for policy analysts and researchers. It maintains a good balance between accuracy and speed and requires fewer parameters than most alternative methods.
• Andrew Binning, Nairn MacGibbon and Peter Mawson, A National Accounts Categorisation of COVID-19 Funding Allocation and Expenditure (AN 24/05). This paper presents a National Accounts categorisation of both the funding allocated to the COVID-19 response and the estimated expenditure. This will contribute to a macroeconomic understanding of the fiscal response to the COVID-19 pandemic in New Zealand and the recession that followed. The paper finds that almost 80% of the funding allocated to the COVID-19 response over the first 3 fiscal years has been spent. Estimated COVID-19 expenditure over this period is equivalent to 16% of 2019 GDP. Wage subsidies make up the largest single component of both COVID-19 funding allocations and estimated expenditure. Government consumption makes up the second largest component. This expenditure is more backloaded, spread over a longer time horizon, and allocated across a large number of line items.
• Hilary Devine, Anna Golebicka-Buchanan and Diana Cook, Themes from the Treasury’s Guest Lecture Series: Productivity in a Changing World. This paper provides a summary of the Treasury’s Guest Lecture Series (TGLS) on the theme of Productivity in a Changing World, which ran over 2023-24. Our speakers, and their discussions with audiences, highlighted the wide-ranging and complex interaction between global trends and productivity. Several themes emerged through the series. Most of the speakers recognised the global productivity slowdown, and that New Zealand has not been exempted. Many speakers highlighted the importance of innovation and technological change, and the importance of skills and capabilities which support the diffusion and adoption of new technologies. Several speakers also explored the theme of climate change and productivity, including the compatibility of climate change and productivity goals.

Disclaimer: The views, opinions, findings, and conclusions or recommendations expressed in these papers are strictly those of the authors. They do not necessarily reflect the views of the New Zealand Treasury or the New Zealand Government. The New Zealand Treasury and the New Zealand Government take no responsibility for any errors or omissions in, or for the correctness of, the information contained in papers and articles.

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