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KDI - Korea Development Institute

KDI - Korea Development Institute



Policy Study Does Fiscal Instability Cause Financial Instability? November 16, 2021


Series No. 2021-05

Policy Study KOR Does Fiscal Instability Cause Financial Instability? #Banks and Financial Institutions #General(Other) #Fiscal Policy
DOI P-ISBN979-11-5932-670-7 E-ISBN979-11-5932-680-6

November 16, 2021

  • 프로필
This study analyzes the impact of fiscal instability on the soundness of financial institutions. The IMF's long-term fiscal outlook (2021) forecasts Korea's public finances to weaken over the medium to long term. Deteriorating fiscal stability may undermine the soundness of the financial sector by way of the financing channels of government bonds and guarantees. Through an empirical analysis, this study finds that the higher the risk of sovereign default, as measured by credit default swap (CDS) premiums on government bonds, the higher the risk of bank default, as measured by bank bonds CDS premiums. Moreover, this study looks at other countries sharing similar fiscal and financial features as Korea―without reserve currencies, greater banking sector size relative to national revenue, and huge private sector credit that is rapidly expanding― and finds that for such countries, bank default risk is further amplified when sovereign default risk increases.

The analysis results may have two policy implications. Firstly, it is necessary to build up fiscal soundness, and this is an indispensable policy agenda item for the Korean economy to pursue over the longer term. Secondly, the banking sector needs to become less reliant on public finances and more self-sufficient. In case of a bank failure in contingencies, it is desirable to adopt a bail-in system that requires creditors to share the losses to rescue the defaulted financial institutions rather than bail-out, which provides relief at the expense of government revenue.
요 약

제1장 서 론

제2장 재정불안이 금융불안을 초래하는 채널
 제1절 보증 관련 채널
 제2절 국채 관련 채널
 제3절 기타 채널
 제4절 (보론) 금융불안이 재정불안을 초래하는 채널

제3장 우리나라 현황 및 가설 도출
 제1절 선진-비기축통화국 분류
 제2절 재정건전성 현황
 제3절 금융건전성 현황
 제4절 재정-금융 연계성 관련 현황
 제5절 대외채무 현황
 제6절 가설 도출

제4장 재정건전성이 금융건전성에 미치는 영향 분석
 제1절 자 료
 제2절 국가부도 위험이 은행부도 위험에 미치는 영향
 제3절 재정-금융 연계성의 강도에 영향을 주는 요소
 제4절 Acharya et al.(2014)과의 차이

제5장 결론 및 정책적 시사점

부 록
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