Problems with Long-term Financial Sustainability of Export Credit Agencies

Pýcha, Mikuláš

doi:10.18267/j.pep.762

Cited by 2 publications

(1 citation statement)

References 12 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The importance of the sustainability of export support has been increasing in the past few years, as we can see in the most recent articles appearing globally, although they do not directly address the relationship between the amount of insurance cover and its price. A possible threat to state budgets arising from excessive export support, which may create systematic losses over a long period of time, is described by Pycha (2020). It seems that the OECD Arrangement does not make any connection between the MPRs and the total amount of insured value, because a significant part of the insured value consists of insured interest, while the premium rate is applied only to the insured principal amount.…”

Section: Literature Reviewmentioning

confidence: 99%

Fair Insurance Cover for Export Credit Under OECD Pricing Framework

Pýcha¹

2021

Prague Economic Papers

Self Cite

View full text Add to dashboard Cite

This article aims to analyse the issue of a lack of rules on the insurance cover of interest from an OECD perspective during the period 2010-2020. Export credit agencies (ECAs) support export and apply minimum premium rates (MPRs) to the principal amount only, while the insurance agreement covers also the interest amount. This area can be described as a grey zone, because ECAs can decide themselves what cover they provide for a limited price. This paper explains which parts of a lending rate should be covered under credit insurance and provides theoretical and empirical analysis of the maximum extent of interest cover. The extent of such cover is closely related to the return on ECAs' investments. An excessive amount of interest cover creates room for market failures such as moral hazard or adverse selection, which have a negative impact on the domestic economy. The right amount of interest cover, on the other hand, guarantees long-term sustainability and a level playing field among ECAs, as the OECD requires.

show abstract

Section: Literature Reviewmentioning

confidence: 99%

Fair Insurance Cover for Export Credit Under OECD Pricing Framework

Pýcha¹

2021

Prague Economic Papers

Self Cite

View full text Add to dashboard Cite

show abstract

Providing Export Credit Support Right: Consequences for Public Budgets

Pýcha¹

2022

Prague Economic Papers

Self Cite

View full text Add to dashboard Cite

This analysis tries to address the problem of the insufficiency of premium rates used by export credit agencies. This paper aims to answer why and how states should run agencies that may create losses. We see that each supported exporter brings some other benefits to the public budget, and we try to propose how it could be measured. This paper therefore focuses on benefits and costs of the domestic economy. This analysis aims to develop a model that calculates the impacts of each supported export project. The results must be comparable between projects so that projects can be ranked and decisions made on which ones should receive support under current capacity restraints. The current state of knowledge has been analysed, and little attention has been paid to this microeconomic area of export support. The model structure also helps us understand why governments tend to maintain export credit agencies even though they may be temporarily loss-making.

show abstract

Problems with Long-term Financial Sustainability of Export Credit Agencies

Cited by 2 publications

References 12 publications

Fair Insurance Cover for Export Credit Under OECD Pricing Framework

Fair Insurance Cover for Export Credit Under OECD Pricing Framework

Providing Export Credit Support Right: Consequences for Public Budgets

Contact Info

Product

Resources

About