The real effects of bank public guarantees

• Antragsteller: Professor Reint Gropp, Ph.D.
• Fachliche Zuordnung: Wirtschaftstheorie
• Förderung: Förderung von 2012 bis 2016
• Projektkennung: Deutsche Forschungsgemeinschaft (DFG) - Projektnummer 202718286

In the wake of the recent financial crisis, many governments extended public guarantees to banks (e.g., U.S.: Indy Mac, Fannie Mae, Freddy Mac; UK: Bradford Bingley, Northern Rock, RBS, HBOS, Lloyds; Germany: IKB, Hypo Real Estate; Belgium/Netherlands: Dexia, Fortis). Evidence on the likely effect of such intervention on the real economy (e.g. growth, employment, the allocation of capital) is scarce, as in most cases guarantees are granted in the midst of a crisis, in which case the real effects of the guarantees are confounded by the real effects of the crisis itself. To disentangle the two is very difficult. In addition, in order to estimate the real effects of guarantees, data that link banks with their customers are necessary. In this proposal we do not consider the introduction of government guaran-tees, but rather their removal based on the European court decision regarding the savings bank sector in Germany. The removal was not prompted by a financial event, but exogenously imposed by judges. We propose to use this natural experiment to identify the effects of such guarantees on credit con-straints, political lending, growth, and capital allocation. Second, we have access to data that link the savings banks, for which the guarantees were removed, to their customers and would require funding for similar firm level data that link other firms with banks. The data would permit an examination of the transmission channel between public guarantees, bank behaviour, and the real economy.

• DFG-Verfahren: Schwerpunktprogramme
• Teilprojekt zu: SPP 1578: Finanzmärkte und Gesamtwirtschaftliche Entwicklung
• Beteiligte Person: Professor Dr. Andre Güttler