The Viability of Fiscal Policy in South Korea, Taiwan, and Thailand

The viability of stimulative fiscal policy has become a political issue in South Korea, Taiwan, and Thailand since the Asian financial crisis of 1997. This paper examines historical relationships between government spending, taxes, and output in these countries using cointegration and vector autoregression techniques with data starting in the 1950s. South Korea has had a policy of spend-and-tax, Taiwan tax-and-spend, while in Thailand there has been no apparent approach to fiscal policy. For the three countries, fiscal policy has had zero to negligible effects on output and is not recommended as a way to stimulate output.fiscal policy, thailand, south korea