Mitigating Liquidity Constraints: Public Export Credit Guarantees in Germany

39 Pages Posted: 1 Sep 2012

See all articles by Gabriel J. Felbermayr

Gabriel J. Felbermayr

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Inga Heiland

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Erdal Yalcin

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute; University of Applied Sciences Konstanz

Date Written: August 30, 2012

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.

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

JEL Classification: F360, G280, H250, H810

Suggested Citation

Felbermayr, Gabriel J. and Heiland, Inga and Yalcin, Erdal and Yalcin, Erdal, Mitigating Liquidity Constraints: Public Export Credit Guarantees in Germany (August 30, 2012). Available at SSRN: https://ssrn.com/abstract=2138811 or http://dx.doi.org/10.2139/ssrn.2138811

Gabriel J. Felbermayr (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Inga Heiland

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

Erdal Yalcin

University of Applied Sciences Konstanz ( email )

Alfred-Wachtel-Straße 8
Konstanz, 78462
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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