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Fiscal Polocy Effects on Consumption and Current Account by Using a Discontinuous Time Horizon Model in Korea

Author

Listed:
  • Chae-Deug Yi

    (Dong-Eui University)

Abstract

This paper has investigated the responses of consumption and current account in Korea, to the fiscal policies using a discontinuous time horizon model in which the fiscal policy effects can be different according to whether economic agents have the finite or infinite time horizons. This paper uses the Korean quarterly data for the period 1976:I-1997:IV to test the theoretical model empirically. The empirical results show that private consumption and current account are not significantly affected by government debt in contrast to conventional Keynesian macroeconomic model. Ricardian equivalence proposition with the infinite horizons seems to be more persuasive to explain the fluctuation of consumption and current account in Korea.

Suggested Citation

  • Chae-Deug Yi, 2000. "Fiscal Polocy Effects on Consumption and Current Account by Using a Discontinuous Time Horizon Model in Korea," Korean Economic Review, Korean Economic Association, vol. 16, pages 243-266.
    • Handle: RePEc:kea:keappr:ker-200012-16-2-04
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    More about this item

    Keywords

    Discontinuous Time Horizon; Fiscal Policy; REP;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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