There have been many academic works on the transsmisson mechanism of fiscal deficit policy. However, most existing theories on this issue tend not to take account of the socio-economic structure of economic society to which the policy has been applied...
There have been many academic works on the transsmisson mechanism of fiscal deficit policy. However, most existing theories on this issue tend not to take account of the socio-economic structure of economic society to which the policy has been applied. Since the fiscal phenomenon is routinely social and historical, in order to examine the economic role of fiscal deficit, special attention needs to be paid to the charateristics of the socio-economic structure arising from historical background, rather than merely analysing the transmisson mechanism directly. This study seeks to find that effects of fiscal deficit are distorted or leak out under the peculiar socio-economic structure. The study suggests to apply the main theme introduced to the Korean case. This paper is devided into two main sections. It first briefly reviews and examplifies the transmission mechanisms analyzed in major theories on the economic role of fiscal deficit. Second, it explins and charaterizes the socio-economic structure referring to a specific set of institutions dealing with the institutional environment in general. Then, the aspect of the distortion or the leaking out of the effect of fiscal deficit under the socio-economic structure is examined. In sum, there is a dyad relationship between the fiscal deficit and the socio-economic structure of a society. So, the theories relevant to the fiscal deficit without taking a particularsoci-economicstructure intoconsideration are nothing more than an interesting theoretical possibility. In order to judge the effect of fiscal deficit on an economy, one must remember to examine the peculiarities of the socio-economic framework of the country. Consequently, what matters is not whether a fiscal deficit as a fiscal policy is desirable, nor whether the state should be strong.. Rather what is of consequence is how to achieve the long-term bases for accumulation through gaining public control over the socio-economic structure.