On measuring the effects of fiscal policy in global financial crisis: Evidences from an export-oriented island economy

Following the 2008 financial crisis, Taiwan implemented various fiscal policies so that they could offset the shocks from the financial crisis. In the present study, we investigate whether these two fiscal policies alleviated the shock generated by the 2008 financial crisis on Taiwan's economy and unemployment. The findings provide that the economic and employment effects generated by the public work investment project were the most substantial in the public sector. By contrast, the economic and employment effects generated by the consumption vouchers policy were the largest in the service sector. These outcomes are closely related to Taiwan's industry structure. The fiscal multiplier of the public investment project and consumer vouchers distribution was 1.94 and 1.47. The evidence in the present study also seems to suggest that the two fiscal policies examined could not induce an effective long-term transformation of Taiwan's economic system.