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"PUBLIC CREDIT"
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States of credit
States of Creditprovides the first comprehensive look at the joint development of representative assemblies and public borrowing in Europe during the medieval and early modern eras. In this pioneering book, David Stasavage argues that unique advances in political representation allowed certain European states to gain early and advantageous access to credit, but the emergence of an active form of political representation itself depended on two underlying factors: compact geography and a strong mercantile presence.
Stasavage shows that active representative assemblies were more likely to be sustained in geographically small polities. These assemblies, dominated by mercantile groups that lent to governments, were in turn more likely to preserve access to credit. Given these conditions, smaller European city-states, such as Genoa and Cologne, had an advantage over larger territorial states, including France and Castile, because mercantile elites structured political institutions in order to effectively monitor public credit. While creditor oversight of public funds became an asset for city-states in need of finance, Stasavage suggests that the long-run implications were more ambiguous. City-states with the best access to credit often had the most closed and oligarchic systems of representation, hindering their ability to accept new economic innovations. This eventually transformed certain city-states from economic dynamos into rentier republics.
Exploring the links between representation and debt in medieval and early modern Europe,States of Creditcontributes to broad debates about state formation and Europe's economic rise.
eBook
Public guarantees
This paper analyses the effects that public credit guarantees have on SME business activity and investment. We focus the study on the main regional mutual guarantee institution in the Spanish Region of Madrid, covering two distinct stages of the economic cycle and credit environments: first, the full range of the country’s financial crisis with credit constraints (2009–2011), and later, the recovery stage with credit expansion (2012–2015). Using propensity score matching based on economic activity and company size, we show that guarantees allow for the relaxation of credit constraints, driving turnover and investment during both recession and growth. We also find that mutual guarantee schemes constituted a greater stimulus for firms during contraction; thus, they can act as countercyclical policies. Moreover, although guarantees had a substantial effect on all small companies (those with fewer than 50 employees), they had the greatest impact on microenterprises (those with fewer than 10 employees). We show the activities for which guarantees constitute a greater boost, which may inform public-policy designs for specific types of business.
Journal Article
Favorable credit to private agents and the local economies in the deprived regions of Brazil: a spatial panel analysis
This article examines how the resources transferred to private economic agents under favorable conditions through Constitutional Funds affect the GDP per capita of municipalities in the deprived regions of Brazil. We utilize data spanning from 2002 to 2019 and employ Spatial Econometrics models to address observed spatial autocorrelation. Additionally, we incorporate loans from other public sources to firms in these municipalities. The results reveal that both sources of loans have a minor positive effect on the GDP per capita of these municipalities.
Journal Article
The consolidation of public banking in Spain: from the 1970s crisis to the 2008 crisis
This article contributes to the literature analysing the role of public banks in crises. Taking the case of Spain, it analyses the behaviour of the public bank (ICO) between 1971 and 2015, specifically during two crises: the crisis of the 1970s, when Spain was an economically backward country coming out of a dictatorship; and that of 2008–13, by which time it had integrated into the international economy. Public credit underwent sweeping privatization in 1991, which translated into major downsizing. From then on, a gradual process of modernization began, mainly characterized by institutional changes in governance and access to resources. Our results indicate that public and private credit behave differently during recessions. Private credit always remains closely synchronized with the business cycle, but public credit less so.
Journal Article
Reconfiguration of financial system elements to restore economic growth: the system simplicity and transformation towards state-based and corporate-based types
Since subprime mortgage crisis of 2008, financial system has no longer driven economies; zero or small GDP dynamics was only maintained by massive sovereign borrowings. The article reviews various theoretical approaches of the financial system characteristics and elements to find its better configuration and to reshape the system as economic engine.
Journal Article
Misallocation, Access to Finance, and Public Credit: Firm-Level Evidence
Using a database of 23,000 firms in 45 economies, we test the quantitative importance of access to finance and access to public and private credit for the determination of misallocation. We first derive measures of factor market and size distortions, and then use these measures within a regression framework to test the significance of self-declared access-to-finance obstacles as well as the effect of access to a credit line issued by either a government-owned or private bank. We find that access-to-finance obstacles and private credit increase the dispersion of distortions. Public credit has a very small effect. For firms that do not face financial obstacles, public credit increases the dispersion of distortions; for firms that face financial obstacles, it slightly decreases dispersion. Public credit does not appear to compensate for the distortions that exist in private credit markets. Quantitatively, however, financial variables explain a very small part of the dispersion of factor market and size distortions.
Journal Article
SMEs, public credit guarantees and mutual guarantee institutions
Purpose
The purpose of this paper is to focus on public guarantees granted to micro-, small- and medium-sized enterprises (SMEs) by the Italian national credit guarantee programme (Fondo Centrale di Garanzia – Central Guarantee Fund – (CGF)). The CGF provides a direct guarantee to banks granting loans or a counter-guarantee to mutual guarantee institutions (MGIs) acting as first-level guarantors. Because the behaviour of MGIs could affect the default risk of counter-guaranteed loans, it is vital to investigate their operating and structural characteristics in order to identify an optimal design for public credit guarantee schemes (PCGSs).
Design/methodology/approach
Using regression models, the paper analyses the determinants of default for 33,229 SME loans guaranteed by an MGI and counter-guaranteed by the Italian CGF. The dependent variable is the ex-post default risk of SMEs’ counter-guaranteed loans in the 2010-2011 period. The explanatory variables are certain characteristics of the MGI.
Findings
The authors demonstrate that increases in an MGI’s leverage and the size of the counter-guaranteed portfolios increase the default risk. When the counter-guaranteed portfolio increases, MGIs are more risk taking but take less risk than when local and specialized MGIs are at play. Finally, direct public aid is relevant.
Practical implications
An appropriate design of the PCGS becomes crucial to controlling moral hazard in financial institutions and ensuring the financial sustainability of public intervention in favour of SMEs.
Originality/value
The paper evaluates an original and confidential firm-level data set that is not available in public documents or supervisory board statistics but is collected directly from the MGIs that participated in this study.
Journal Article
Market Access and Agricultural Diversification: An Analysis of Brazilian Municipalities
Market access has a deep impact on farmers’ decisions, influencing their choice of crops and technology adoption. Crop diversification depends on the availability of markets to trade the agricultural portfolio. This study explored how market access impacted the level of diversification in 5565 Brazilian municipalities from 2013 to 2021. We developed a regression model considering how variables related to market access and commercialization (storage, roads, distribution centers, commercialization credit, among others) affected a local (municipality level) diversification index. After environmental variables were controlled, the results indicated that most of the market access variables have a significant impact on diversification. We also used map analysis to analyze the regional patterns of specialization in Brazilian agriculture, concluding that logistics and commercialization infrastructure have strong influence on the level of diversification in Brazil, a major agricultural powerhouse in the world. The results indicate that market access variables affect diversification and should be considered by policy makers aiming to increase sustainability in agriculture and livestock.
Journal Article