Fiscal Policy Issues in Korea after the Current Crisis
Hong, Kiseok | July 2010
Abstract
This paper examines fiscal policy issues in the Republic of Korea (hereafter Korea) after the 2009 global financial crisis, including the timing of fiscal policy responses, the effectiveness of expansionary measures, and the long-term implications for government debt. In order to evaluate more accurately Korea’s fiscal response since late 2008, this paper conducts an empirical analysis using historical data from Korea and other countries and derives stylized patterns on counter-cyclicality of fiscal policy and its role in the recovery process. The analysis suggests that Korea’s fiscal stimulus in 2009, while having contributed greatly to the economy’s fast recovery, was unusually large compared with typical fiscal responses during economic downturns. This paper also investigates whether the rapid increase in Korea’s fiscal debt burden is admissible in terms of long-term sustainability. Although existing evidence suggests that Korea’s fiscal debt is still manageable, the sizeable deficit and the increasing trend in the debt to GDP ratio in recent years call for vigilance. The paper concludes with some suggestions for fiscal consolidation in Korea: a stricter practice of medium-term budget planning, expansion of automatic stabilizers and reduction of discretionary components, use of more comprehensive measures of government debt, and further reforms in the national pension system are discussed.
Citation
Hong, Kiseok. 2010. Fiscal Policy Issues in Korea after the Current Crisis. © Asian Development Bank. http://hdl.handle.net/11540/3813. License: CC BY 3.0 IGO.Keywords
Alleviating Poverty
Anti-Poverty
Extreme Poverty
Fight Against Poverty
Global Poverty
Health Aspects Of Poverty
Indicators Of Poverty
Participatory Poverty Assessment
Poverty Eradication
Poverty Analysis
Poverty In Developing Countries
Poverty Reduction Efforts
Urban Poverty
Public Financial Management
Financial System
Financial Statistics
Development Indicators
Environmental Indicators
Economic Indicators
Educational Indicators
Demographic Indicators
Health Indicators
Disadvantaged Groups
Low Income Groups
Socially Disadvantaged Children
Rural Conditions
Rural Development
Social Conditions
Urban Development
Urban Sociology
Pension Funds
Mutual Funds
Social Equity
Financial Aspects
Fiscal Policy
Poor
Economic forecasting
Health expectancy
Social groups
Political participation
Distribution of income
Inequality of income
Developing countries
Rural community development
Mass society
Social change
Social policy
Social stability
Population
Sustainable development
Peasantry
Urban policy
Urban renewal
Pension plans
Individual retirement accounts
Employee pension trusts
Investment management
Investments
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Citable URI
http://hdl.handle.net/11540/3813Metadata
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