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The Effectiveness of Public Credit Guarantees in the Japanese Loan Market

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  • Uesugi, Iichiro
  • Sakai, Koji
  • Yamashiro, Guy M.

Abstract

This paper examines the effectiveness of public credit guarantee programs in not only increasing the availability of loans to small and medium enterprises (SMEs), but in also improving the ex-post performance of borrowing firms. Using a unique panel data set, we identify the effects of a massive credit guarantee program implemented by the Japanese government from 1998 to 2001. While we do find that the availability of loans increased for program participants, when loans were provided by undercapitalized banks the increased liquidity persisted for only a few years. Further, the ex-post performance of program participants, with the exception of firms with sizable net worth, deteriorated relative to their non-participating counterparts.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 24 (2010)
Issue (Month): 4 (December)
Pages: 457-480

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Handle: RePEc:eee:jjieco:v:24:y:2010:i:4:p:457-480

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Web page: http://www.elsevier.com/locate/inca/622903

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Keywords: Credit crunch Loan guarantees Matching estimation Small and medium enterprises;

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References

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  1. Barbara Sianesi, 2004. "An Evaluation of the Swedish System of Active Labor Market Programs in the 1990s," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 133-155, February.
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  19. Diamond, Douglas-W, 2001. "Should Japanese Banks Be Recapitalized?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(2), pages 1-19, May.
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Citations

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Cited by:
  1. Raphael W. Lam & Jongsoon Shin, 2012. "What Role Can Financial Policies Play in Revitalizing SMEs in Japan?," IMF Working Papers 12/291, International Monetary Fund.
  2. Heshmati, Almas, 2013. "The Effect of Credit Guarantees on R&D Investment of SMEs in Korea," IZA Discussion Papers 7851, Institute for the Study of Labor (IZA).
  3. Ono, Arito & Sakai, Koji & Uesugi, Iichiro, 2012. "The effects of collateral on firm performance," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 84-109.

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