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Countering the cycle : The effectiveness of fiscal policy in Korea

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  • Countering the cycle
  • Eskesen, Leif Lybecker
  • International Monetary Fund


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Title Countering the cycle
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Sub Title

The effectiveness of fiscal policy in Korea

Material Type Reports
Author(English)

Eskesen, Leif Lybecker

Publisher

Washington, D.C.:International Monetary Fund

Date 2009-11
Pages 28
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Holding International Monetary Fund

Abstract

The Korean authorities having taken decisive and proactive fiscal measures to help stem the fallout from the current global economic and financial crisis, with the size of the fiscal stimulus well-above the average response of other G20 economies. In this context, a key question is how effective fiscal policy is as a stabilization tool, especially considering the high openness of Korea's economy. Results based on a macroeconomic model calibrated for Korea provide a strong case for using counter-cyclical fiscal policy, especially if measures appropriately focus on spending with a direct demand impact such as investment and targeted transfers. It also demonstrates the importance a complementary monetary response and the benefits to an open economy such as Korea's of global coordination of fiscal stimulus.

User Note

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate