• Environmental and Resource Economics Review
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• v.16 no.3
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• pp.607-627
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• 2007

By reviewing the current application of Environmental Fiscal Instruments in China, existing policy gaps and weakness, and the feasibility of using EFIs in China, this paper pointed out that the Chinese government faces an historic opportunity for promoting the development of a comprehensive environmental fiscal system. It is proposed that as far as possible the real economic and social costs of pollution and environmental degradation should be reflected in the prices charged for the use of environmental and natural resources. Chinese government should systematize existing environmental fiscal funds and policies, gradually setting up a framework for integrating environmental fiscal instruments into the public financial system.

• KDI Journal of Economic Policy
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• v.26 no.2
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• pp.105-141
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• 2004

The success of fiscal decentralization depends on an effective intergovernmental transfer system. This paper focuses on the Local Share Tax(LST), the primary intergovernmental fiscal transfer in Korea. The LST, by law, aims to mitigate horizontal fiscal imbalance among the local governments. As an attempt to test the fiscal equity of the LST empirically, net fiscal benefits of each county are calculated based on a simple model. While the LST contributes to horizontal fiscal measured traditional inequality indices, a geographical pattern of net fiscal benefits is observed. From these findings, the role of LST on fiscal equity needs to be carefully re-examined.

• KDI Journal of Economic Policy
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• v.25 no.1
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• pp.99-145
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• 2003

Quasi-fiscal activities (QFAs) refer to those activities that public corporations carry out to achieve policy objectives of the government. QFAs often lead to the understatement of the government involvement in the economy and the overstatement of its financial balance, thereby lowering fiscal transparency and hiding fiscal risks. Central banks, as public corporations, perform various QFAs in many countries. I define QFAs in this case as those activities that are not directly related to the intrinsic function of central banks, whose responsibility lies in the administration of monetary policy and the provision of banking services for the government and commercial banks. In Korea, the Bank of Korea (BOK) has been an active source of QFAs. Of particular importance are the policy loans to commercial banks to promote their lending to small- and medium-sized enterprises and others. The outstanding stock of policy loans increased rapidly in the aftermath of the recent economic crisis, and stood at 7.6 trillion won (20 percent of the reserve money) at the end of 2002. Another important QFA by BOK stems from the transfer of part of its profits to the central government. The accumulated transfer during 1998-2002 amounted to 9.9 trillion won. My calculation shows that if these and other QFAs had been carried out by the government as explicit fiscal activities, the consolidated central government financial balance would have been below the actual balance by about 0.5 percent of GDP in each year since the economic crisis. It is suggested that the QFAs by BOK be reduced in coming years not only to enhance fiscal transparency but also to expand the flexibility of BOK's reserve management. Abolishing policy loans and minimizing transfers to the government would be the first step in this direction. BOK should also consider paying interest on the government deposit held in BOK.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.741-750
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• 2021

The budget deficit is closely related to expansionary fiscal policy as a fiscal instrument to encourage economic growth. This study aims to apply optimal control theory in the Keynesian macroeconomic model for the economy, so that optimal growth can be found. Macroeconomic variables include GDP, consumption, investment, exports, imports, and budget deficit as control variables. This study uses secondary data in the form of time series, the time period 1990 to 2018. Performing optimal control will result in optimal fiscal policy. The optimal determination is done through simulation, for the period 2019-2023. The discrete optimal control problem is to minimize the objective function in the form of a quadratic function against the deviation of the state variable and control variable from the target value and the optimal value. Meanwhile, the constraint is Keynes' macroeconomic model. The results showed that the optimal value of macroeconomic variables has a deviation from the target values consisting of: consumption, investment, exports, imports, GDP, and budget deficit. The largest deviation from the average during the simulation occurs in GDP, followed by investment, exports, and the budget deficit. Meanwhile, the lowest average deviation is found in imports.

• Environmental and Resource Economics Review
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• v.17 no.4
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• pp.719-749
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• 2008

Using the cost-risk portfolio approach, this study suggests a fiscal budgeting model that provide a measure to allocate fiscal budget among the strategies responding to oil crisis. In addition, it calculates the appropriate fiscal distribution among policy measures for the 2000 to 2006 fiscal years. According to the empirical results, a certain amount of budget should be allocated to the option using futures markets. The strategic stockpiling option turns out be hard to be included in the policy portfolio due to its costs much higher that the other options. Oil well development option should take more than half of total budget since its expenses are assumed to be relatively low.

• KDI Journal of Economic Policy
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• v.34 no.3
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• pp.31-65
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• 2012

We study the sustainability of the current fiscal policy of Korea, and the effects of the social welfare policy expansion, which has been recently discussed among the political circles, on the government budget and the generational equity, using generational accounting. We follow the generational accounting approach, considering the fact that most of the social welfare policies are the entitlement programs, which imposes the limitation of the policy maker's discretion to control the cost of their provision. The social welfare expenditure will change due to the change in the policy environments of the future, such as population aging. Therefore, we need to take into account the government cash flow of the future as well as of the present to investigate its effects on the fiscal sustainability, which implies that the national debt or the budget balance is not a proper index for the investigation. Our findings are as follows. The current fiscal policies are not sustainable, and the long-term budgetary imbalance is shown very serious. The required tax adjustment, which is defined as the percentage change of tax burden required to attain the long-term budgetary balance, is very large. Unless the level of the government expenditure is properly controlled, the tax burden and the social contribution level will rise to the untolerable level. Moreover, the expansion of the social welfare policies, which has been discussed among the political circles, will substantially increase the fiscal burden of the future generations. Even though the provision of the free lunch to the primary and the secondary school students, the free child care, and the discounted college tuition do not increase the fiscal burden much, because their magnitude at present is not large and will decrease due to the decrease in the number of the newborns and the students resulting from the fall in the fertility rate, that of the free health care service will increase tax burden of the future generations very much, because the magnitude of the government expenditure needed at present is very large and the population aging will further increase the magnitude of the health care expenditure. The findings indicate that the structural reforms, to prevent the explosive increase in the social welfare expenditure in the future, are necessary before the implementation of the welfare policy expansion. In particular, the cost control of the social transfers to the elderly needs to be made, because the speed of the population aging of Korea is among the highest in the world. The findings also indicate that the budget balance or the national debt can cause the fiscal illusion, which makes the Korean government budget look sound, even though the fiscal policy will rapidly increase the social welfare expenditure in the future, as the population ages. The generational accounting, which takes into account the cash flow of the future as well as of the present, unlike the budgetary balance and the national debt, which shows the results of the government financial activities of the past and the present, is a useful method to overcome the fiscal illusion.

• 사회경제평론
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• v.31 no.3
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• pp.55-92
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• 2018

Moon Jae-In government, which took power through the candlelight revolution, has put forward a "People First Economy". To realize this goal, the government promised to increase the growth rate of fiscal spending and the proportion of welfare spending compared to the conservative government in the past. This direction is desirable, but it does not meet the expectations of the progressive camp, which has hoped larger-scale welfare through active increased taxation. Above all, it would be hard to overcome the structural risks facing our economy through this policy. More bold fiscal policy is needed. For the time being, it is desirable to push for taxing on top-income households, corporations, and high-value assets, and to make sure that the tax levied on rental income is well established. If these tasks are well realized, it is necessary to move toward the next stage of welfare expansion and increased taxation.

• KDI Journal of Economic Policy
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• v.36 no.2
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• pp.1-64
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• 2014

This paper attempts to search the driving forces of the Korean economy after 2000 by analyzing an estimated DSGE model and observing the degree of implementation regarding non-systematic parts of both the monetary and fiscal policy during the global financial crisis. Two types of trends, various cyclical factors and frictions are introduced in the model for an empirical analysis in which historical decompositions of key macro variables are quantitatively assessed after 2000. While the monetary policy during the global financial crisis have reacted systematically in accordance with the estimated Taylor rule relatively, the fiscal policy which was aggressively expansionary is not fully explained by the estimated fiscal rule but more by the large magnitude of non-systematic reaction.

• Korean journal of communication and information
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• v.63
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• pp.5-25
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• 2013

Korean society suffers from severe divisions represented by bi-polarization and collapse of the middle class. Intensive demanding on expanding social welfare budget has emerged in accordance with such a dramatic shift. Social consensus moving toward well-financed welfare policy, however, happens to meet political opposition supported by the discourse of fiscal soundness. This paper thus pays particular attention to deciphering the discursive structure in way of understanding how discourses bring public policy into play. For this purpose, news articles about fiscal soundness collected from 8 national newspapers have been analyzed in terms of frame, attitude, perspective and world view. Research results show, first of all, that there exist persistent competition between two frames identified as 'reduced tax with fiscal discipline' and 'increased tax with welfare money.' While the 'reduced tax' frame favors in maintaining tax cut at the expense of welfare budjet, the frame of 'increased tax' supports such arguments as the flexible employment of fiscal soundness and prosperity of national community helped by widening tax revenues. Also did these frames include a number of sub-frames like welfare populism, partisan politics, trickle down effect, tax bonanza for the rich, universal welfare and market over-reactions in order to bolster its logical authority. Media's active taking a part in penetrating supportive frames in line with political stance was found as well. Taking into account both the discursive structure upheld by frames and politics materialized by the media, the authors argue that public policies should be considered more as discourse than fixed reality. Shedding additional light on understanding the interplay among public opinion, policies and media discourse is of another importance for further study.

• KDI Journal of Economic Policy
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• v.40 no.1
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• pp.1-30
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• 2018

Ongoing demographic changes have brought about a substantial shift in the size and age composition of the population, which are having a significant impact on the global economy. Despite potentially grave consequences, demographic changes usually do not take center stage in many macroeconomic policy discussions or debates. This paper illustrates how demographic variables move over time and analyzes how they influence macroeconomic variables such as economic growth, inflation, savings and investment, and fiscal balances, from an empirical perspective. Based on empirical findings-particularly regarding inflation-we discuss their implications on macroeconomic policies, including monetary policy. We also highlight the need to consider the interactions between population dynamics and macroeconomic variables in macroeconomic policy decisions.