Mitigating Liquidity Constraints: Public Export Credit Guarantees in Germany
AbstractReportedly, 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 InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3908.
Date of creation: 2012
Date of revision:
public export credit guarantees; credit constraints; firm performance; treatment effects;
Find related papers by JEL classification:
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
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- Joachim Wagner, 2013.
"Credit constraints and exports: A survey of empirical studies using firm level data,"
Working Paper Series in Economics
287, University of Lüneburg, Institute of Economics.
- Wagner, Joachim, 2013. "Credit constraints and exports: A survey of empirical studies using firm level data," Working Paper Series in Economics and Institutions of Innovation 334, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
- Joachim Wagner, 2012.
"Credit constraints and exports: Evidence for German manufacturing enterprises,"
Working Paper Series in Economics
251, University of Lüneburg, Institute of Economics.
- Wagner, Joachim, 2012. "Credit constraints and exports: Evidence for German manufacturing enterprises," Working Paper Series in Economics and Institutions of Innovation 286, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
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