Macroeconomic effects of public credit guarantee issuance shocks: Evidence from Korea’s small business credit guarantee system

초록

Using quarterly data on newly issued public credit guarantees supplied by Korea’s Local Credit Guarantee Foundations, this paper examines the macroeconomic consequences of public credit guarantee issuance shocks, which we interpret as policy-induced credit supply shocks, in an SVAR framework. We find that a positive public credit guarantee issuance shock generates an economically meaningful expansion in real GDP. This expansion is driven mainly by stronger nondurables consumption and private fixed investment. We further find that public credit guarantee issuance shocks support employment creation, especially through regular wage employment, with some short-run resilience in self-employment. Overall, our findings suggest that public credit guarantee provision can operate as a macroeconomically relevant credit supply instrument.

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