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The Effects of Small-Firm Credit Guarantees During Recessions

  • Series
    Erasmus Finance Seminars
  • Speaker(s)
    Juanita Gonzalez-Uribe (London School of Economics, United Kingdom)
  • Field
    Finance, Finance
  • Location
  • Date and time

    December 08, 2020
    15:30 - 16:45

Abstract: Credit guarantees are popular policy responses during crises. Despite their prevalence, evidence of their effectiveness and efficiency effects is sparse. We estimate the impacts of UK guarantees implemented during the Great Recession, by exploiting unexpected firm-size eligibility restrictions, and rich firm-level data. We show compelling evidence that the guarantees enabled financially constrained firms to finance employment during the crisis, which increased productivity and was fundamental for a profitable recovery, particularly for firms facing high-costs to replace employees. The evidence suggests a novel and empirically relevant source of CGS efficiency effects: helping alleviate layoff inefficiencies when labour market rigidities exist.

Link to the seminar:

Meeting ID: 936 0424 7386

Passcode: 003432