Government spending on natural disasters boosts economy, wages, and investments in Korea.
The article explores how government spending affects the economy in Korea after natural disasters. By studying the impact of emergency spending following disasters, the researchers found that when government spending goes up, GDP, private consumption, real wage, and investment also increase. This aligns with the New Keynesian model. Both the narrative approach and SVAR model showed similar results, but timing is crucial in identifying the effects of government spending due to how people anticipate fiscal policies.