Social Welfare Analysis of Policy-based Finance with Support for Corporate Loan Interest

Artikel

We analyze the social welfare effect when a policy-based financial system (PFS) enters a decentralized financial market. Particularly, the PFS in this case supports the interest spread for corporate loans held by firms with heterogeneous bankruptcy decisions under an imperfect information structure. Although support for capital costs through the PFS expands the economy consistently, the optimal level of PFS out of the corporate loan market is estimated to be 8.6% by a simulation model considering social welfare adjusted by the disutility of labor. This result is much lower than the recent level of PFS in the Korean financial sector.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: KDI Journal of Economic Policy ; ISSN: 2586-4130 ; Volume: 43 ; Year: 2021 ; Issue: 4 ; Pages: 45-67 ; Sejong: Korea Development Institute (KDI)

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Bankruptcy; Liquidation
• Subject: Social Welfare ; Policy-based Finance ; Default Decision ; Firm Dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nam, Changwoo
• Event: Veröffentlichung
• (who): Korea Development Institute (KDI)
• (where): Sejong
• (when): 2021

Further information

• DOI: doi:10.23895/kdijep.2021.43.4.45
• Handle: http://hdl.handle.net/10419/249187
• Last update: 10.03.2025, 11:44 AM CET