DOI: 10.36347/sjebm.2018.v05i05.009

Pages: 404-412

The objective of this paper is to investigate the role of fiscal policy on economic resilience in the ASEAN – 5 countries. Fiscal policy plays important role as shock - absorber to promote economic resilience by bringing back aggregate output to potential output in the business cycle during economic shock. In addition, this study examines the effect of fiscal policy in the long – run perspective. This is because the persistent external shocks are likely to prolong economic downturn. Thus, fiscal stabilizing should be taking place in the long run. By using panel data 1981 – 2015, this study utilizes Fully Modified Ordinary Least Square (FMOLS) and reveals that automatic stabilizers and fiscal discretionary tend to decrease output fluctuation in the business cycle to potential output. The result renders evidences that fiscal tools play as shock absorber that promote the resiliency of economy in the ASEAN – 5 countries.