Empirical Economics

, Volume 52, Issue 4, pp 1367–1378

Do credit guarantees for small and medium enterprises mitigate the business cycle? Evidence from Korea


DOI: 10.1007/s00181-016-1106-4

Cite this article as:
Lee, S.H., Lim, ES. & Hwang, J. Empir Econ (2017) 52: 1367. doi:10.1007/s00181-016-1106-4


This study empirically examines the impact of credit guarantees for small and medium enterprises (SMEs) on the business cycle in Korea, using quarterly time series data over the period 2002–2012. Credit guarantees are denoted by the total amount of credit guarantees provided by three authorities in Korea, and the business cycle consists of two volatilities, that is, real GDP per capita and industrial product index. We used Toda and Yamamoto Granger causality test and autoregressive distributed lag (ARDL) bounds test approach to examine the existence of cointegration and to find out the short-run and long-run relationship between credit guarantees and business cycle. The ARDL bounds testing approach has an advantage that it can be used when I (0) and I (1) variables are mixed. Based on the ARDL bounds test approach, we find that credit guarantees for SMEs mitigate business cycle fluctuations in the short run, but find no significant effects in the long run.


Credit guarantees Business cycle SMEs ARDL bounds test 

JEL Classification

E32 G38 

Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.IBK Economic Research InstituteSeoulRepublic of Korea
  2. 2.Chungnam Techno ParkCheonanRepublic of Korea
  3. 3.Department of EconomicsHannam UniversityDaejeonRepublic of Korea

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