This study addresses a key challenge in estimating the macroeconomic effects of fiscal policy: the difficulty of credibly identifying policy shocks. Using a narrative approach, we construct a quarterly series of exogenous tax policy shocks for Korea over 2005~2023 and use it to examine the short-run macroeconomic effects of tax policy.

The identified exogenous tax shocks exhibit a weaker association with business-cycle fluctuations than conventional measures based on observed tax revenue changes, suggesting that they may better capture discretionary policy actions rather than automatic stabilizers. We further assess exogeneity using checks based on GDP forecast errors (“surprises”), aiming to mitigate endogeneity concerns that arise when revenue fluctuations are used directly as shocks.

Empirical analysis based on a Bayesian vector autoregression (BVAR) indicates that exogenous tax cuts generally raise real GDP and prices in the short run. The effects vary across tax categories: labor tax cuts show relatively larger expansionary impacts on output, while consumption tax cuts display limited output effects despite pronounced revenue losses. Capital tax cuts tend to operate with longer lags, accompanied by relatively large short-run revenue declines. These patterns suggest that tax policy can affect the economy through heterogeneous transmission channels depending on the tax base, policy objectives, and the revenueoutput trade-offs. We also find that the response of total tax revenue after tax cuts is sometimes statistically insignificant, consistent with offsetting forces between direct revenue reductions and revenue gains induced by higher output.

Rather than offering prescriptive recommendations for specific taxes, this study provides a transparent framework for identifying and quantifying tax policy shocks and documents the relative patterns of macroeconomic and revenue responses across tax types and motivations. Important limitations remain, including residual uncertainty in narrative classifications when reforms pursue multiple objectives and the need for additional robustness analyses given the sample length and shock frequency. Future research could refine classification rules, compare alternative identification strategies, and integrate spending shocks to strengthen policy implications.

Abstract (ENG)
Preface
Summary (KOR)

Chapter 1. Introduction

Chapter 2. Literature Review
　Section 1. Previous Studies on the Identification of Exogenous Fiscal Policy
　Section 2. Main Contents of Romer and Romer (2010)
　Section 3. Classification of Previous Studies and the Contribution of This Study

Chapter 3. Identifying Fiscal Policy Shocks through a Narrative Approach
　Section 1. Data
　Section 2. Identifying the Motivation for Tax Policy Changes
　Section 3. Constructing a Time Series of Tax Policy Shocks

Chapter 4. Estimated Macroeconomic Effects of Exogenous Tax Changes
　Section 1. Methodology in the Existing Korean Literature
　Section 2. Testing the Exogeneity of the Exogenous Tax Change Variable
　Section 3. Analysis Results Using the Exogenous Tax Change Variable

Chapter 5. Conclusion

References
Appendix