The Causal Effect of Credit Guarantees for SMEs: Evidence from Italy

42 Pages Posted: 3 May 2013

See all articles by Alessio D'Ignazio

Alessio D'Ignazio

Bank of Italy

Carlo Menon

Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI); Bank of Italy

Date Written: February 27, 2013

Abstract

We evaluate the effectiveness of a partial credit guarantee program implemented in a large Italian region using unique microdata from a broad set of firms. Our results show that the policy was effective to the extent that it resulted in an improved financial condition for the beneficiary firms. While the total amount of bank debt was unaffected, firms showed a significant increase in the long-term component. Furthermore, targeted firms benefited from a substantial decrease in interest rates. On the other hand, there is some evidence that the probability of default increases as a consequence of the treatment, although the effect is only marginally significant. There are, instead, no effects on the real outcomes.

Keywords: financial subsidies, credit constraints, banking

JEL Classification: G2, H2, O16

Suggested Citation

D'Ignazio, Alessio and Menon, Carlo, The Causal Effect of Credit Guarantees for SMEs: Evidence from Italy (February 27, 2013). Bank of Italy Temi di Discussione (Working Paper) No. 900, Available at SSRN: https://ssrn.com/abstract=2259586 or http://dx.doi.org/10.2139/ssrn.2259586

Alessio D'Ignazio (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Carlo Menon

Organization for Economic Co-Operation and Development (OECD) - Directorate for Science, Technology and Industry (STI) ( email )

Paris
France

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy

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