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The Viability of Fiscal Policy in South Korea, Taiwan, and Thailand

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  • Tsangyao Chang
  • WentRong Liu
  • Michael Thompson

Abstract

The viability of stimulative fiscal policy has become a political issue in South Korea, Taiwan, and Thailand since the Asian financial crisis of 1997. This paper examines historical relationships between government spending, taxes, and output in these countries using cointegration and vector autoregression techniques with data starting in the 1950s. South Korea has had a policy of spend-and-tax, Taiwan tax-and-spend, while in Thailand there has been no apparent approach to fiscal policy. For the three countries, fiscal policy has had zero to negligible effects on output and is not recommended as a way to stimulate output.

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File URL: http://icepp.gsu.edu/sites/default/files/documents/icepp/wp/ispwp0209.pdf
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Bibliographic Info

Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0209.

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Length: 23 pages
Date of creation: 01 May 2002
Date of revision:
Handle: RePEc:ays:ispwps:paper0209

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Keywords: fiscal policy; thailand; south korea;

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References

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  1. Buchanan, James M. & Wagner, Richard E., 1978. "Dialogues concerning fiscal religion," Journal of Monetary Economics, Elsevier, vol. 4(3), pages 627-636, August.
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  7. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
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  14. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
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  16. Hattori, Tamio & Sato, Yukihito, 1997. "A Comparative Study of Development Mechanisms in Korea and Taiwan: Introductory Analysis," The Developing Economies, Institute of Developing Economies, Japan External Trade Organization(JETRO), vol. 35(4), pages 341-357, December.
  17. J. Bradford DeLong, 1998. "The budget deficit," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jan30.
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Cited by:
  1. Yu Hsing, 2006. "Analysis of Output Fluctuations in Taiwan: An Application of the IS–MP–AS Model," International Advances in Economic Research, Springer, vol. 12(2), pages 203-211, May.
  2. Benno Torgler, 2004. "Tax Morale in Asian Countries," CREMA Working Paper Series 2004-02, Center for Research in Economics, Management and the Arts (CREMA).

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