Date Added: Dec 2010
This paper investigates the effectiveness of fiscal policy in five Association of Southeast Asian Nations (ASEAN) of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Through a structural Vector Auto Regression (VAR) 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 the impact of taxes on output mainly reflect heightened concerns over public finances amid the Asian financial crisis and the recent global financial crisis. On the other hand, for Singapore and Thailand, there is evidence that government spending can at times be useful as a tool for countercyclical policy.