財政赤字의 波及效果와 持續可能性

Fiscal Deficit Effects and the Sustainability

This paper surveys the recent literature analysing fiscal deficit effects and their sus-tainability. The fiscal deficit sustainability is tested and the fiscal structure is evaluated for determinants of reducing the deficit efficiently. The results are the following: 1) the cointegration test to Korean fiscal policy over the sample period 1970-1999 is unable to be rejected, 2) the Korean primary balance is an increasing function of the debt-GDP ratio, which means Korean fiscal deficit is satisfying an intertemporal budget constraint. 3) The increase in the debt-GDP or fiscal deficit may cause significant reduction in real GDP. 4) The composition of fiscal adjustments influences real GDP - government investment spending increases real GDP more than government consumption spending while indirect taxes decrease real GDP less than direct taxes. The implications from the above results are as follows: ① the fiscal deficit in Korea may be sustainable but require significant welfare cost. ② The budget deficit can be reduced by raising taxes or by cutting spending. However the two strategies are not equivalent and cutting consumption spending rather than investment spending or raising indirect taxes rather than direct taxes are more desirable as the reduction in real GDP may be considerably less.