Optimal debt size; Debt service capacity of local governments; Local bonds
Issue Date
2004-12
Publisher
한국지방재정학회
Citation
한국지방재정논집, v.9, No.2, Page.31-50
Abstract
This paper develops the way how a central government sets the standards of debt service capacity of autonomous local governments. Because the standards are based on the optimal debt size, it sets up the model to derive the optimal size and explains the difficulties to obtain it empirically. It reviews various indexes which are used to represent credibility of local bonds or debt service capacity and accounts for their limitations. Hackbart and Ramsey's regression method(1988) is applied to Korean local governments to estimate their debts on their socioeconomic characteristics such as local revenue and population, and to set standards of their debt service capacities.