Thread by @Brad_Setser

South Korea's fiscal loosening under President Moon is a significant story.

But saying that Korea is struggling even with years of increased public spending after the crisis is a bit like saying that Germany has no experience with fiscal austerity ...

1/x

Korea's post crisis fiscal policy was even tighter than Germany's ...

It hasn't actually run a deficit (general government deficit that is) in the past 15ys (the 2020 deficit is a forecast, obviously)

2/x

And prior to President Moon, Korea actually hadn't increased public spending (as a share of GDP) after the crisis -- public spending (including spending on the social safety net) is actually very low.

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The story in Korea isn't that fiscal stimulus hasn't worked ...

It is that fiscal stimulus hasn't been tried (until very recently)

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ft.com/content/5dd041…

And given that Korea is every bit at export dependent as Germany (and is suffering from an export price shock from memory chips), I would argue that Korea's 2% 2019 growth is evidence that stimulus actually works (if anything the 19 stimulus was too small)

5/x

A bit more on Korea's post crisis fiscal for those interested ...

cfr.org/blog/korea-ger…

and yes, I think President's Moon policy of fiscal easing is the right one --

Korea has basically no (net) debt and even with the coming 2020 fiscal stimulus, it will only be running a fiscal deficit of maybe 1% of GDP (general government ... )

cfr.org/blog/can-korea…