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Effects of Government Consumption shocks in China, Japan, and Korea

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  • Minju Jeong

    (Seoul National University)

Abstract

This paper investigates the effects of government consumption shocks on various key macro variables for China, Korea and Japan, by using a structural VAR model. The main empirical findings are as follows. First, government spending multipliers of all three countries are far larger than 1 in recent years. The government spending multiplier is larger in China than in Korea and Japan. The effectiveness of fiscal expansion has not been changed in China, but substantially changed in Korea (after Asian financial crisis) and Japan. Second, the effects on exchange rate and trade balance are different across countries. Interestingly, real exchange rate depreciates and trade balance improve more under more flexible exchange rate regime. Some empirical findings are consistent with the standard theory but others are not.

Suggested Citation

  • Minju Jeong, 2016. "Effects of Government Consumption shocks in China, Japan, and Korea," Proceedings of Economics and Finance Conferences 4206742, International Institute of Social and Economic Sciences.
    • Handle: RePEc:sek:iefpro:4206742
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    More about this item

    Keywords

    Structural VAR; government consumption shocks; Fiscal Multiplier; Real Exchange Rate; Current Account; China; Japan; Korea;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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