The Effects of Government Spending in Korea: a FAVAR Approach (in Korean)

Wongi Kim ()
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Wongi Kim: Department of Economics, Chonnam National University

Economic Analysis (Quarterly), 2019, vol. 25, issue 3, 100-137

Abstract: In this study, I analyzed the effects of government spending on macro variables and on each industry by using a factor augmented vector autoregressive model (FAVAR) and 167 macro-variables in Korea since 2000. The results reveal that the effects of two types of government spending ― government consumption and government investment ― greatly differ, therefore it is better to consider the two types of spending separately for a more precise analysis. The stimulus effects of government consumption are clear, but those of government investment are not. In addition, the crowding-out effects of government spending take place through the current account deficit channel rather than the traditional crowding-out channel, reducing private consumption and investment. Both types of government spending show a positive effect on the construction industry. Also, an increase in government consumption stimulates output in various manufacturing and service sectors.

Keywords: Government Spending; Government Consumption; Government Investment; Factor Augmented Vector Autoregressive Model; Industry Effects (search for similar items in EconPapers)
JEL-codes: C32 E62 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bok:journl:v:25:y:2019:i:3:p:100-137

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