Credit Guarantees, Firm Response, and Macroeconomics

Yasin Onder and Jose Villagas ()
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Jose Villagas: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We evaluate the impact of Belgium’s 2020 Public Credit Guarantee Scheme (CGS) using administrative data. The CGS applied to all firms, with those employing fewer than 50 workers benefiting from a 25 basis point reduction in interest rates. Leveraging this policy-induced discontinuity, we compare firms around the employment threshold. Firms receiving the lower interest rates experienced increases in employment and investment, along with a reduction in firm exit rates. The scheme helped address the debt overhang problem by easing pricerelated credit constraints: for every €1 of guaranteed debt at a 25 basis points lower rate, non-guaranteed debt decreased by €0.13.

Keywords: Credit guarantees; credit frictions; regression discontinuity design; debt overhang squares; efficiency; robustness (search for similar items in EconPapers)
JEL-codes: E32 G21 H81 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2024-11
New Economics Papers: this item is included in nep-ban, nep-cfn and nep-fdg
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:24/1097

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