The Scope for Fiscal Policy: A Case Study of Thailand

This article is concerned with the application of fiscal policy instruments in stabilisation policy. Theoretical and practical considerations suggest that the scope for fiscal policy may be limited, but analysis of the actual performance of Thailand shows that an active use has been made of it. Compared with advanced economies, the role of automatic stabilisers is relatively small; discretionary fiscal policy interventions have been more important. Particularly in the years after the Asian financial crisis fiscal policy has been actively used, first, under IMF programmes, to reduce aggregate demand, and later to stimulate the economy. The article focuses on the application of fiscal policy instruments, not on the impact of fiscal policy interventions on the real economy.