Author : Sora Chon(Inha University), Wongi Kim(Sungshin Women's University), Seri Shim(Bank of Korea)

This paper investigates the monetary-fiscal policy mix in Korea using the fis­cal theory of the price level (FTPL) framework. To this end, we first check fiscal­related regime changes using the Threshold Vector Autoregression. The statistically identified fiscal regimes are hard to interpret FTPL-related regimes and are not eco­nomically meaningful. We then estimate a medium-scale dynamic stochastic gen­eral equilibrium model (DSGE) under two different regimes: active fiscal - passive monetary policy (Regime F) and passive fiscal - active monetary policy (Regime M) . DSGE estimation reveals Regime M prevailed. The results suggest that mon­etary policy plays a dominant role in determining equilibrium dynamics, including inflation in Korea.