 Macroeconomic effects of government transfer payments: Evidence from KoreaWongi Kim Economic Modelling, 2021, vol. 102, issue C Abstract: Although government transfer payments (TPs) have recently become an important policy option to prevent severe recessions, the literature on the aggregate effects of TPs is sparse. To fill this gap, this study empirically examines the effects of government TPs on the aggregate economy. To this end, I estimate two leading time series models using Korean data: a local projection with an instrumental variable model and a proxy vector autoregressive model. Employing natural disasters as an instrumental variable to identify government TP shocks, the results reveal that an exogenous increase in TPs has large stimulus effects, including raising gross domestic product, private consumption, and investment. In particular, an increase in TPs boosts non-durable goods consumption, services consumption, and residential investment. Finally, the estimated peak output multipliers of TPs are greater than one, which implies that TPs can be an effective tool for overcoming recessions. Keywords: Transfer payment; Proxy VAR; Local projection; Instrumental variable; Fiscal multiplier (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:102:y:2021:i:c:s0264999321001607 DOI: 10.1016/j.econmod.2021.105571 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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