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  • P-ISSN 1738-656X
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한국개발연구. Vol. 13, No. 3, October 1991, pp. 31-53

https://doi.org/10.23895/kdijep.1991.13.3.31

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The Analysis of the Structural Budget Deficit (Written in Korean)

문형표

Author & Article History

Manuscript .

Abstract

Actual deficits are poor guide to fiscal policy because they do not distinguish between two sources of change in revenues and expenditures; automatic responses to fluctuations in economic activity, and structural or discretionary changes in fiscal policy. Thus, to identify the structural changes in fiscal policy, it is necessary to remove from the actual surpluses or deficits the effect of changes in economic activity. For this account the structural budget deficit that excludes the cyclical component from actual deficit is considered to be a better summary measure of the effect of a fiscal program on aggregate demand. This paper presents the estimates of structural budget deficits of the consolidated central government during 1972-90 for a historical assessment of the past fiscal policy that will aid the future policy planning. According to the estimates, the structural budgets shifted from recurrent deficits during the 1970s to surplus in 1980, due to the consistent government effort to reduce the size of actual deficits since the late 1970s. However, due to the rapid increase in the size of government expenditure in recent years, the size of the structural budget. Deficits is increasing again, despite the recent economic boom, since 1989. The analysis also indicates that the automatic component of the budget has significant stabilizing effect on the economy, by offsetting roughly 15-18 percent of increases in nominal GNP gap. The structural changes in fiscal policies, however, showed strong pro-cyclical movements, except for the early 1980s, which implies that structural budgets have not been in stabilizing directions. To reduce the structural deficits and to maintain the structurally balanced budget in the mid-and long-term, the government's efforts to increase tax revenue and to reduce the expansionary pressure of budget outlays are required. It is also required that government should strengthen the stabilizing role of discretionary fiscal policies by adjusting fiscal policies counter-cyclically during business cycles.

JEL Code

H30, E62, H60

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