An Analysis Of Korea 's Fiscal Policy In The Context Of Global Financial Crisis

In response to United States Lehman Brothers’bankrupt in September2008, South Korea and most other countries are implementing unprecedented fiscal expansions. These fiscal expansions have evaluated to play a role of decelerating the recession. In particular, South Korea became one of three countries achieving the economic growth rate same as in2009among OECD countries. Their drastic fiscal policy attributed in large portion. Korean government has considered Jet lag issues of fiscal policy enforcement and introduced fiscal policy inspection system. As a result, it improved the effectiveness of Korean fiscal policy.In this paper, the development directions of fiscal policy have been elaborated based on three principles. First of all, fiscal policy should be used as economy countermeasure. It also means that financial surplus should be realized in an economic boom by maintaining fiscal budget balance scale and national debt size, etc, under the sustainable level. To this, it is necessary to realize fiscal deficit in the recession and surplus in the boom. However, most of the countries collect more taxes and spend all of them in the economic boom. In South Korea’s case, the possibility for the economic boom is becoming higher. It is necessary to enforce expenditure restriction and higher tax levy in order to switch to government budget surplus. Second, procedure for budget decision, such as preliminary feasibility study, should be kept to inspect and maintain individual budgeted project consistently. Fiscal health could not be in effect without ensuring the effectiveness and efficiency of individual project. Thirdly, additional tax revenue should be guaranteed and the tax burden ratio level should be targeted higher. For additional tax revenue, it is necessary to foster taxation sources, strengthen tax management, exempt tax-free, and maintain the top tax rate level.