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The economic and fiscal value of German guarantee banks

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  • Hennecke, Peter
  • Neuberger, Doris
  • Ulbricht, Dirk

Abstract

Guarantee banks backed by the state aim to close the gap in the financing of small and medium-sized enterprises or start-ups caused by lacking collateral or equity and high information asymmetry. The present study quantifies the economic and fiscal net benefits of guarantee banks in the new federal states of Germany, where economic development is still lacking behind those in the old federal states. Using data of five guarantee banks and results from enterprise and bank surveys, we measure finance and project additionality of loan and equity guarantees provided over the period 1991-2015. Cost-benefit analyses show that the economic benefits of the guarantee banks are considerable because of increased production and employment, while the economic costs are negligible. The real GDP increases by about 1.2 euro per euro guarantee each year. In the years 2008 to 2014, there were net fiscal gains of several hundred million euros in the respective federal states.

Suggested Citation

  • Hennecke, Peter & Neuberger, Doris & Ulbricht, Dirk, 2017. "The economic and fiscal value of German guarantee banks," Thuenen-Series of Applied Economic Theory 152, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:152
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    References listed on IDEAS

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    More about this item

    Keywords

    small business finance; loan guarantee schemes; collateral; credit rationing; public guarantees; cost-benefit analysis;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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