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A note on the effects of government spending on economic growth in Korea

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  • Jinho Choi
  • Minkyu Son

Abstract

This study seeks to investigate how expansionary government spending shocks in Korea have influenced GDP growth since the 1980s through the lenses of time varying parameter structural vector autoregression (TVP-SVAR) approach. Our estimation results suggest that an increase in discretionary government spending has affected Korea’s economic growth in a favorable way while its stimulating effect has noticeably declined over the sample period. Furthermore, our cointegrating regression analysis suggests that government spending multiplier estimates in Korea have positive relationships with the public investment spending on infrastructure as well as the aggregate level of household debts, whereas modestly exhibiting inverse associations with trade openness and public debts.

Suggested Citation

  • Jinho Choi & Minkyu Son, 2016. "A note on the effects of government spending on economic growth in Korea," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 21(4), pages 651-663, October.
    • Handle: RePEc:taf:rjapxx:v:21:y:2016:i:4:p:651-663
    DOI: 10.1080/13547860.2016.1204746
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