Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249187 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] KDI Journal of Economic Policy [ISSN:] 2586-4130 [Volume:] 43 [Issue:] 4 [Publisher:] Korea Development Institute (KDI) [Place:] Sejong [Year:] 2021 [Pages:] 45-67
Publisher: 
Korea Development Institute (KDI), Sejong
Abstract: 
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.
Subjects: 
Social Welfare
Policy-based Finance
Default Decision
Firm Dynamics
JEL: 
E22
G32
G33
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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