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Mitigating Liquidity Constraints: Public Export Credit Guarantees in Germany

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  • Gabriel J. Felbermayr
  • Inga Heiland

    ()

  • Erdal Yalcin

    ()

Abstract

Reportedly, firms often find it impossible to finance large and long-term projects despite positive net present values. Should governments step in and can their assistance be effective? This paper studies the case of public export credit guarantees in Germany. Covering the default risk of exporters’ foreign customers, the policy is supposed to enable funding of international business opportunities that would otherwise remain unexploited. Using German firm-level data covering the universe of publicly insured firms for the years 2000 to 2010, this study tests for the causal effect of guarantees on sales and employment. It employs a difference-in-differences strategy combined with a matching approach, to create an appropriate control group of untreated firms. It finds that guarantees increase firm-level sales and employment on average by about 4.5 and 3.0 percentage points, respectively. During the financial crisis of 2008/09, effects turn out larger. These findings suggest the presence of credit constraints and provide an argument justifying the observed government intervention.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3908.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3908

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Related research

Keywords: public export credit guarantees; credit constraints; firm performance; treatment effects;

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Cited by:
  1. Marc Auboin, 2014. "Facilitating the Access of Trade Finance to Traders: The Role of the WTO," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 15(3), pages 12-16, 08.
  2. Joachim Wagner, 2013. "Credit constraints and exports: A survey of empirical studies using firm level data," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 287, University of Lüneburg, Institute of Economics.
  3. Joachim Wagner, 2012. "Credit constraints and exports: Evidence for German manufacturing enterprises," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 251, University of Lüneburg, Institute of Economics.
  4. Silvia Del Prete & Stefano Federico, 2014. "Trade and finance: is there more than just 'trade finance'? Evidence from matched bank-firm data," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 948, Bank of Italy, Economic Research and International Relations Area.

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