Macroeconomic Effects of Government Spending Shocks: New Evidence Using Natural Distaster Relief in Korea
AbstractWe investigate the macroeconomic effects of government spending shocks in Korea. We compare results obtained with two alternative approaches: the narrative approach and Structural Vector-Autoregressive model (SVAR). We propose a new methodology for identifying exogenous and unexpected fiscal shocks under the narrative approach: natural disasters and the associated government emergency spending in the wake of such disasters. Our results suggest that when government spending increases, the responses of GDP, private consumption, real wage and investment are all positive, which is in accord with the New Keynesian model. Similar results are obtained with both approaches. However, comparing the two approaches suggests that the timing is very important in identifying government spending shocks due to the anticipation effects of fiscal policy.
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Bibliographic InfoPaper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 12-05.
Length: 50 pages
Date of creation: Sep 2012
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Other versions of this item:
- Weonho Yang & Jan Fidrmuc & Sugata Ghosh, 2012. "Macroeconomic Effects of Government Spending Shocks: New Evidence Using Natural Disaster Relief in Korea," CESifo Working Paper Series 3943, CESifo Group Munich.
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
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