Export Credit Guarantees, Moral Hazard and Exports Quality

18 Pages Posted: 7 Oct 2004

See all articles by María D. C. García‐Alonso

María D. C. García‐Alonso

University of Kent, Canterbury

Paul Levine

School of Economics, University of Surrey

Antonia Morga

University of Kent, Canterbury

Abstract

We analyse the role played by export credit guarantees (ECGs) in encouraging exports to developing countries. The existence of moral hazard on the side of the firm is introduced. We show that the inability of the exporter's government to verify the actual quality of the product will limit its ability to encourage trade through ECGs, once the coverage provided goes beyond a certain threshold. This result provides a rationale behind the limited coverage on ECGs.

Suggested Citation

Garcia-Alonso, Maria Carmen and Levine, Paul L. and Morga, Antonia, Export Credit Guarantees, Moral Hazard and Exports Quality. Bulletin of Economic Research, Vol. 56, No. 4, pp. 311-327, October 2004. Available at SSRN: https://ssrn.com/abstract=598363

Maria Carmen Garcia-Alonso (Contact Author)

University of Kent, Canterbury ( email )

Canterbury, Kent CT2 7NZ
United Kingdom

Paul L. Levine

School of Economics, University of Surrey ( email )

Guildford
Surrey GU2 7XH
United Kingdom
+44 1483 259 380 Ext. 2773 (Phone)
+44 1483 259 548 (Fax)

Antonia Morga

University of Kent, Canterbury

Canterbury, Kent CT2 7NZ
United Kingdom

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