An Evaluation of Fiscal Policy Response to Economic Cycles
Two conditions should be satisfied if fiscal policy is to stabilize economic cycles; proper policy timing and significant policy effect. This paper evaluates whether the policy timing has been proper in Korea by investigating the correlation between fiscal policy stance and economic conditions. We f...
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| Format: | Article |
| Language: | English |
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Korea Development Institute
2006-12-01
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| Series: | KDI Journal of Economic Policy |
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| Online Access: | https://doi.org/10.23895/kdijep.2005.28.2.51 |
| _version_ | 1818905664623214592 |
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| author | Lee, Sam-Ho |
| author_facet | Lee, Sam-Ho |
| author_sort | Lee, Sam-Ho |
| collection | DOAJ |
| description | Two conditions should be satisfied if fiscal policy is to stabilize economic cycles; proper policy timing and significant policy effect. This paper evaluates whether the policy timing has been proper in Korea by investigating the correlation between fiscal policy stance and economic conditions. We first calculate quarterly FIs (Fiscal Impulse) using the estimated potential GDP and fiscal balance data. Based on these indices, we 1) analyze how FIs respond to the economic conditions summarized in GDP gap through regression analysis, 2) compare average FIs in expansionary and recessionary periods according to the NSO's economic cycles, 3) evaluate fiscal policy maker's perception of economic conditions and its intention by reviewing the budget proposals. Although regression analysis shows that overall fiscal policy, especially expenditure side, has properly responded to economic conditions, average FIs do not show the significant difference between expansionary and recessionary periods. It is inconclusive whether the fiscal policy timing has been proper. Budget proposals show that actual fiscal policy stance has been sometimes inconsistent with the policy intention, which implies that it is hard to utilize fiscal policy actively to stabilize the economy. |
| first_indexed | 2024-12-19T21:26:56Z |
| format | Article |
| id | doaj.art-bf6768020e9e432cb58dfb170da299a1 |
| institution | Directory Open Access Journal |
| issn | 2586-2995 2586-4130 |
| language | English |
| last_indexed | 2024-12-19T21:26:56Z |
| publishDate | 2006-12-01 |
| publisher | Korea Development Institute |
| record_format | Article |
| series | KDI Journal of Economic Policy |
| spelling | doaj.art-bf6768020e9e432cb58dfb170da299a12022-12-21T20:05:07ZengKorea Development InstituteKDI Journal of Economic Policy2586-29952586-41302006-12-01282519610.23895/kdijep.2005.28.2.51An Evaluation of Fiscal Policy Response to Economic CyclesLee, Sam-Ho0Associate Research Fellow, Korea Development InstituteTwo conditions should be satisfied if fiscal policy is to stabilize economic cycles; proper policy timing and significant policy effect. This paper evaluates whether the policy timing has been proper in Korea by investigating the correlation between fiscal policy stance and economic conditions. We first calculate quarterly FIs (Fiscal Impulse) using the estimated potential GDP and fiscal balance data. Based on these indices, we 1) analyze how FIs respond to the economic conditions summarized in GDP gap through regression analysis, 2) compare average FIs in expansionary and recessionary periods according to the NSO's economic cycles, 3) evaluate fiscal policy maker's perception of economic conditions and its intention by reviewing the budget proposals. Although regression analysis shows that overall fiscal policy, especially expenditure side, has properly responded to economic conditions, average FIs do not show the significant difference between expansionary and recessionary periods. It is inconclusive whether the fiscal policy timing has been proper. Budget proposals show that actual fiscal policy stance has been sometimes inconsistent with the policy intention, which implies that it is hard to utilize fiscal policy actively to stabilize the economy.https://doi.org/10.23895/kdijep.2005.28.2.51재정정책(Fiscal Policy)재정충격지수(Fiscal Impulse(FI))경기순환(Economic Cycles) |
| spellingShingle | Lee, Sam-Ho An Evaluation of Fiscal Policy Response to Economic Cycles KDI Journal of Economic Policy 재정정책(Fiscal Policy) 재정충격지수(Fiscal Impulse(FI)) 경기순환(Economic Cycles) |
| title | An Evaluation of Fiscal Policy Response to Economic Cycles |
| title_full | An Evaluation of Fiscal Policy Response to Economic Cycles |
| title_fullStr | An Evaluation of Fiscal Policy Response to Economic Cycles |
| title_full_unstemmed | An Evaluation of Fiscal Policy Response to Economic Cycles |
| title_short | An Evaluation of Fiscal Policy Response to Economic Cycles |
| title_sort | evaluation of fiscal policy response to economic cycles |
| topic | 재정정책(Fiscal Policy) 재정충격지수(Fiscal Impulse(FI)) 경기순환(Economic Cycles) |
| url | https://doi.org/10.23895/kdijep.2005.28.2.51 |
| work_keys_str_mv | AT leesamho anevaluationoffiscalpolicyresponsetoeconomiccycles AT leesamho evaluationoffiscalpolicyresponsetoeconomiccycles |