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경기순환에 따른 재정정책의 시간변동효과 측정(A study on measuring of the time varying fiscal policy effectiveness depending on the business cycle)

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Title 경기순환에 따른 재정정책의 시간변동효과 측정(A study on measuring of the time varying fiscal policy effectiveness depending on the business cycle)
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Material Type Reports
Author(Korean)

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Publisher

세종 : 한국개발연구원

Date 2017-12
Series Title; No 정책연구시리즈 / 2017-18
ISBN 979-11-5932-342-3
Pages 88
Subject Country South Korea(Asia and Pacific)
Language Korean
File Type Documents
Original Format pdf
Subject Economy < Economic Conditions
Economy < Economic Administration
Holding 한국개발연구원; KDI국제정책대학원
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Abstract

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.