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Changing impact of fiscal policy on selected ASEAN countries

  • Tang, Hsiao Chink
  • Liu, Philip
  • Cheung, Eddie C.

This paper investigates the effectiveness of fiscal policy in five Association of Southeast Asian Nations: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Through a small open economy structural vector autoregression model, government spending is found to have weak and largely insignificant impact on output, while taxes are found to have outcomes contrary to conventional theory. Extensions using a time-varying VAR model reveal that the positive impact from higher taxes on output mainly reflects heightened concerns over public finances during the Asian financial crisis and the recent global financial crisis. On the other hand, for Thailand, there is some evidence that government spending can at times be useful as a tool for short-term countercyclical policy.

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File URL: http://www.sciencedirect.com/science/article/pii/S104900781200070X
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Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 24 (2013)
Issue (Month): C ()
Pages: 103-116

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Handle: RePEc:eee:asieco:v:24:y:2013:i:c:p:103-116
DOI: 10.1016/j.asieco.2012.07.003
Contact details of provider: Web page: http://www.elsevier.com/locate/asieco

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