The Korean government set out a reimbursement plan for 69 trillion won of public fund. According to the plan, the financial sector is to take responsibility for 20 trillion won for 25 years starting from 2003 and the government finances, 49 trillion w...
The Korean government set out a reimbursement plan for 69 trillion won of public fund. According to the plan, the financial sector is to take responsibility for 20 trillion won for 25 years starting from 2003 and the government finances, 49 trillion won.
This study is designed to compare the two reimbursement methods under-mentioned in terms of social welfare effect. The two chosen methods are as follows:
· 1 Method 1 (current): The government repays at the end of each fiscal year 2 trillion won on present value as of end 2002 as a part of general accounts.
· 1 Method 2: Fiscal surplus for the 25 years will all be used for reimbursement.
The differential between the fiscal surplus and 49 trillion won will be repaid annually with the use of general accounts for the 25 years.
Stochastic simulation was employed as the analysis method. As a result of estimated effect on social welfare comparison by reimbursement method, Method 2 proved to be much more efficient than Method 1.