Effects of Government Consumption shocks in China, Japan, and Korea

Minju Jeong ()
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Minju Jeong: Seoul National University

No 4206742, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: This paper investigates the effects of government consumption shocks on various key macro variables for China, Korea and Japan, by using a structural VAR model. The main empirical findings are as follows. First, government spending multipliers of all three countries are far larger than 1 in recent years. The government spending multiplier is larger in China than in Korea and Japan. The effectiveness of fiscal expansion has not been changed in China, but substantially changed in Korea (after Asian financial crisis) and Japan. Second, the effects on exchange rate and trade balance are different across countries. Interestingly, real exchange rate depreciates and trade balance improve more under more flexible exchange rate regime. Some empirical findings are consistent with the standard theory but others are not.

Keywords: Structural VAR; government consumption shocks; Fiscal Multiplier; Real Exchange Rate; Current Account; China; Japan; Korea (search for similar items in EconPapers)
JEL-codes: C32 E62 F41 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2016-10
New Economics Papers: this item is included in nep-mac and nep-sea
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Published in Proceedings of the Proceedings of the 6th Economic & Finance Conference, OECD Headquarters, Paris, Oct 2016, pages 249-261

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Persistent link: https://EconPapers.repec.org/RePEc:sek:iefpro:4206742

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