Credit Guarantee Schemes issue partial guarantees, i.e. they cover up to a certain share of the loan borrowed by firms, in order to mitigate financial stability and moral hazard problems on the part of the guaranteed firms.

Although guarantees play a key role in relaxing financial constraints, existing studies have largely focused on firms having received a guarantee, and ignored the magnitude of the partial guarantee.

This article takes this issue into account and estimates a dose-response function, namely a different treatment effect for each value of the coverage ratio. For Italy, an inverse-U shaped relationship is found with the maximum of the effectiveness around 70% and no effects below and above 50% and 80%, respectively. This approach is quite informative as allows the policy makers to tailor the policy according to the specific value of the ratio.