18 Second, the policy measures try to counter the negative effect of a recession by providing financial support to the “banker” at a time of many headwinds to the economy. Third, the policy measures aim to act as a catalyst for financial institutions’ lending and investment to businesses with high social return.
By offering long-term funds at a very low interest rate, they supplement the low private return that mirrors the presence of externality in innovation. The policy philosophy here is different from that of the Keynesian approach. These measures aim to improve financial intermediation’s long-term efficiency in resource allocations, while the Keynesian approach endorses public spending to fill the short-run shortage in aggregate demand.