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The economic and fiscal benefits of guarantee banks in Germany

Author

Listed:
  • Peter Hennecke

    (University of Rostock)

  • Doris Neuberger

    (University of Rostock
    iff
    DIW
    CERBE)

  • Dirk Ulbricht

    (iff institut für finanzdienstleistungen Hamburg)

Abstract

State-backed credit guarantee schemes aim to close the gap in the financing of small enterprises or start-ups caused by lacking collateral and high information asymmetry. The present study discusses the effectiveness of German guarantee banks compared to credit guarantee schemes in other countries and quantifies their economic and fiscal net benefits in the new federal states of Germany, where economic development is still lacking behind. Using data of five guarantee banks and 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. For the years 2008–2014, we find net fiscal gains of several hundred million euros in each federal state.

Suggested Citation

  • Peter Hennecke & Doris Neuberger & Dirk Ulbricht, 2019. "The economic and fiscal benefits of guarantee banks in Germany," Small Business Economics, Springer, vol. 53(3), pages 771-794, October.
    • Handle: RePEc:kap:sbusec:v:53:y:2019:i:3:d:10.1007_s11187-018-0069-6
    DOI: 10.1007/s11187-018-0069-6
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    1. Muraközy, Balázs & Telegdy, Álmos, 2023. "The effects of EU-funded enterprise grants on firms and workers," Journal of Comparative Economics, Elsevier, vol. 51(1), pages 216-234.

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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
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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