The results of the studies and the papers included in this literature review indicate that public export finance has a positive effect on exports. However, the extent of the effects differs depending on the kind of export finance used, as well as the types of firms using the services and the specific foreign markets being targeted.

Introduction and background

Firms in most countries have access to public export finance such as export credit guarantees or export credits – insurance and loans provided by the state to promote the internationalisation of firms. In Sweden there are four public organisations that offer export finance services: The Swedish Export Credits Guarantee Board, a public agency, and three state-owned companies, The Swedish Export Credit Corporation, Almi AB and Swedfund International AB.

There are a number of theoretical arguments as to why the state should provide export finance. Some of the arguments centre around the fact that exporting is costly and often requires more capital than domestic sales. Additionally, banks and other private financial institutions may have limited information on many foreign markets. As a result of high-risk premiums due to uncertainty, or because of high information costs, export finance can be expensive, or simply unavailable. If large public institutions offer export finance it may be possible to benefit from economies of scale and thus keep costs down.

This literature review covers empirical studies on the effects of public export finance. We study both the methods used and results found in the scientific literature in this area. Our main objective is, however, to explore methodologies, rather than to analyse results. An evaluation of the Swedish export finance system using some of the methodologies discussed here could provide useful information for adapting export finance to best support the internationalisation of Swedish firms. Growth Analysis sees a clear need for further studies in this area to increase our knowledge of how export finance services work.

A limited field of research

We find that very few empirical studies on the effects of public export finance have been published. Furthermore, these studies are limited to a small number of countries and they are predominantly focused on export credit guarantees, rather than other financial services.

The vast majority of the studies are on the macroeconomic level. The dominant method used is the gravity model for international trade. There are also a few published papers in which the effects of export finance have been studied at the branch level, also using the gravity model. The effects of export finance at the firm level have only been studied in a few papers. These studies are, however, primarily based on data from surveys and questionnaires. We are only aware of one paper in which the authors use firm-level data (micro data) to estimate the effects of public export finance.

Public export finance appears to have positive effects

Information regarding the effects of export finance is limited as the research field is quite small. Thus, even though the published papers and studies reviewed give an indication of the types of effects export finance can have, we should be careful about making inferences or broad generalisations based upon such a limited material.

The majority of studies included in this literature review have focused on the effects of export finance on export volumes.  Most of these studies find that export finance has a positive effect on exports. However, results vary depending on the methodology used, the foreign markets being targeted, as well as the type of firm and type of export finance studied. Some of the studies estimate the effects of export finance on other outcome variables than exports. For example, impacts on employment levels have been studied on both micro and macroeconomic levels, with varying results.

Further studies

There is a clear need for further studies on the effects of public export finance. From a Swedish policy perspective it is important that this area receives more attention. A well-designed and well-functioning export finance system can be an important component in the implementation of both the Swedish Government’s Export Strategy as well as the Govern­ment’s objectives concerning the supply of capital to SMEs.

Growth Analysis has two main recommendations for further studies in this area. Firstly, compilation and analysis of descriptive statistics on Swedish export finance would give a clearer picture of the system and its use. Secondly, an evaluation of the effects of export credits and guarantees at the firm level could provide relevant knowledge that can be used to adapt the system to future challenges.