Working Paper: NBER ID: w9385
Authors: Takero Doi; Takeo Hoshi
Abstract: This paper examines the financial health of the Fiscal Investment and Loan Program (FILP) as of the end of March 2001. We study the financial conditions of FILP recipients, which include public corporations and local governments. We find many are de facto insolvent. Our estimates suggest as much as 75% of the FILP loans are bad. The expected losses are estimated to be about ?75 trillion (over 15% of GDP). We also studied the effects of the FILP reform of April 2001, which tries to introduce market discipline in allocation of FILP funds. No significant changes in financial flow are detected, yet. The financial market seems to differentiate the newly introduced FILP agency bonds, which are supposed to without government guarantee, from government guaranteed bonds. It is too early to tell, however, whether the financial market will become an effective monitor of FILP agencies.
Keywords: No keywords provided
JEL Codes: G2; G3; H6; H7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial condition of FILP recipients (F35) | expected losses (G33) |
| expected losses (G33) | impede economic recovery (E65) |
| introduction of reforms in April 2001 (E69) | significant changes in financial flows (F65) |
| financial losses (G33) | limit FILP's ability to finance socially beneficial projects (G32) |