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Fiscal Policy Issues In Korea After The Current Crisis

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Executive Summary

This paper examines fiscal policy issues in the Republic of Korea (hereafter Korea) after the 2009 global financial crisis, including the timing of fiscal policy responses, the effectiveness of expansionary measures, and the long-term implications for government debt. In order to evaluate more accurately Korea's fiscal response since late 2008, this paper conducts an empirical analysis using historical data from Korea and other countries and derives stylized patterns on counter-cyclicality of fiscal policy and its role in the recovery process. The analysis suggests that Korea's fiscal stimulus in 2009, while having contributed greatly to the economy's fast recovery, was unusually large compared with typical fiscal responses during economic downturns.

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