Fiscal Polocy Effects on Consumption and Current Account by Using a Discontinuous Time Horizon Model in Korea

Chae-Deug Yi
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Chae-Deug Yi: Dong-Eui University

Korean Economic Review, 2000, vol. 16, 243-266

Abstract: This paper has investigated the responses of consumption and current account in Korea, to the fiscal policies using a discontinuous time horizon model in which the fiscal policy effects can be different according to whether economic agents have the finite or infinite time horizons. This paper uses the Korean quarterly data for the period 1976:I-1997:IV to test the theoretical model empirically. The empirical results show that private consumption and current account are not significantly affected by government debt in contrast to conventional Keynesian macroeconomic model. Ricardian equivalence proposition with the infinite horizons seems to be more persuasive to explain the fluctuation of consumption and current account in Korea.

Keywords: Discontinuous Time Horizon; Fiscal Policy; REP (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2000
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