A Market Without a Market: Estimating the Appropriate Scale of Policy Funds

Q: What does this research mean for the field?

A structural equilibrium model utilizing application and support amounts can quantitatively estimate the appropriate scale of policy funds, revealing that potential demand exceeds actual support by 36% and that approximately 55% of requested amounts reflect true demand rather than strategic over-application. Novelty: ClaimNovelty.METHODOLOGICAL. Consensus alignment: ConsensusAlignment.NEUTRAL.

Jaesung James Park

doi:10.17287/kbr.2026.30.3.27

August 31, 2026Korea Business Review

A Market Without a Market: Estimating the Appropriate Scale of Policy Funds

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Key Points

To quantitatively estimate the optimal supply scale of government policy funds in a non-market lending environment lacking price adjustment mechanisms.
Constructed a Bayesian conditional probability structural model using a truncated normal distribution to represent demand and supply equilibrium for small and medium-sized enterprises rated BBB- or lower.
Analyzed empirical application and disbursement data from the Korea SMEs and Startups Agency alongside macroeconomic indicators spanning from 2000 to 2024.
Potential demand exceeded actual disbursements by an average of 36% (annual demand gap of 1.07 trillion KRW), while equilibrium supply capacity exceeded disbursements by 24% (supply gap of 0.66 trillion KRW).
The estimated application coefficient of 0.550 indicated that approximately 55% of requested amounts reflected true equilibrium demand, with the remainder driven by strategic over-application.
Actual disbursements exceeded model predictions during economic downturns in 2009 and 2020–2021, confirming the countercyclical intervention role of policy financing.

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Implication

Structural modeling uncovers funding gaps and strategic over-application in small-business policy lending, highlighting countercyclical buffer capacities during crises.

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Jaesung James Park (2026) studied this question.

synapsesocial.com/papers/6a993626636c6408cfa7f039 https://doi.org/10.17287/kbr.2026.30.3.27

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A Market Without a Market: Estimating the Appropriate Scale of Policy Funds

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A Market Without a Market: Estimating the Appropriate Scale of Policy Funds

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