This study analyzes the time-varying effectiveness of fiscal policy in line with business cycles and level of volatility. For this purpose, the impact of fiscal policy was examined within specific periods using conventional SVAR models, and the time-varying effect of fiscal expenditure was analyzed through smooth transition vector autoregressive (STVAR) models. The empirical results show that the effects of government spending are strongly influenced by business cycles and level of volatility. Indeed, a boost in government spending can stimulate the economy in times of high volatility or an economic downturn or diminish it during relative stability. Based on the findings, this study presents the following policy proposals. During a rapid economic downturn, such as an international financial crisis, a sustained fiscal expansion through government investment is required to stimulate an economic recovery. And, in order to maximize the effects of the fiscal expansion, fiscal space must first be secured during normal periods. Additionally, if economic stimulus is needed in a situation where economic fluctuations are ambiguous, a temporary increase in government consumption, rather than government investment, may be considered. This is because increasing large-scale government investments in a stable economic environment may contract the economy. Finally, the economic environment must be examined closely to minimize the side effects of fiscal expansion, bearing in mind that the effectiveness of fiscal expenditure may depend on business cycles and volatility.