COMPENSATION OF HIGHER INTEREST RATES BY THE GOVERNMENT SUPPORT MECHANISM

Vadim Arkin

Alexander Slastnikov

We study the problem of compensating higher interest rates on loan with the help of non-tax government support mechanisms: co-financing of investment projects and subsidizing interest rates on loan. As a criterion for compensation it is considered optimal expected NPV of implemented project. We received the boundary within which the loan interest rate can be compensated by using the above mechanisms of government support. Moreover, we set a number of conditions under which compensation provides non-negative budgetary effect (i.e. the expected tax revenue from the implemented project will exceed the costs of supporting the project).