The Korea Local Administration Review

In South Korea, local currency was introduced by most local governments to stimulate the local economy and support small retailers. Based on survey data conducted in July 2020 and september 2020, this paper analyzes the policy effects of Daejeon’s local currency, ‘Ontong Daejeon’. We decompose the effects into net consumption stimulation effect, small retailers conversion effect and local economy conversion effect. The results show that local currency not only contributes to local economy by creating additional consumption but also benefits to small retailers. Due to the usage restriction to small retailers, 31.7% of the local currency payments transferred to small retailers, which otherwise would have gone through online stores, department stores. Similarly, 16.8% of the local currency payments would have spent outside the local economy without usage restriction. Finally, 26%∼29% the local currency payments are estimated to ‘unplanned purchases’ which induced by discounts.