Kreditanstalt für Wiederaufbau (KfW): the institution and its countercyclical role in the recent crisis

Abstract

Historically, development banks have been characterized as financial institutions geared to support projects that require long-term financing and improving the socioeconomic conditions of a country. In the post-Second World War period, they were constituted in large numbers, while non industrialized countries began their industrialization projects and mature destroyed European economies were promoting reconstruction efforts. Germany, heavily ruined by World War II, founded, in 1948, the Kreditanstalt für Wiederaufbau (KfW). The main goal of this institution was to finance the reconstruction of the nation. In the early years, the bank worked vigorous in heavy industry projects, housing reconstruction and agriculture. Having accomplished its initial objective right in the middle of the 50's, the bank continues working intensely nowadays. The role of development banks has changed over the years and with the economic and financial crisis that started in 2008, they seem to have made an important countercyclical behavior. Some authors point specifically to a countercyclical performance of KfW. The objective of the proposed research is to study how the German development bank Kreditanstalt für Wiederaufbau (KfW) took over this role.