Tuborg Research Centre Seminar: Erdal Yalcin, Munich University

Title: Export Market Risk and the Role of Public Credit Insurance

Info about event

Time

Friday 6 September 2013,  at 13:30 - 14:30

Location

Fuglesangs Allé 4, 8210 Aarhus V, building 2632(L), room 161

Organizer

Philipp Schröder

Speaker: Dr. Erdal Yalcin Deputy Director, Ifo Center for International Economics, Ifo Institute for Economic Research at the University of Munich

Title: Export Market Risk and the Role of Public Credit Insurance (with Inga Heiland and Erdal Yalcin)

Organizer: Philipp Schröder

Abstract: In this paper we analyze the impact of public export credit guarantees on firms' exports. Earlier studies have shown that export credit guarantees stimulate exports, employment and value added. Furthermore, there is evidence on the aggregate level that financial market imperfections are key to understanding the beneficial workings of the policy instrument. We use monthly firm level survey data combined with official transaction level data on covered exports of German firms to analyze in detail the hypothesis that the public guarantees unfold their positive effects by mitigating financial constraints. Considering exporter and importer characteristics, as well as transaction-specific characteristics, we can shed light at the particular sources of financing constraints that can be alleviated by the policy instrument. Our results indicate that the positive effects on exports do indeed work through a mitigation of financial constraints. Furthermore, we find great heterogeneity. Small firms appear to benefit more, and the public guarantees matter most for contracts involving large values at risk. Our analysis contributes to a better understanding of the interplay of export credit guarantees with financial market imperfections which is crucial for an efficient design of this policy instrument.