How to estimate the future financing needs of European SMEs was the question asked by the European Investment Fund (EIF) to LSE Master’s students in the framework of a capstone project the results of which were presented to the EIB Group in March 2021.

Using the European Central Bank SAFE survey, the students tested four econometric models and selected two of them : Heckoprobit and HCM.

However both models present limitations and future demand can be overestimated. Thus the students believe that more accurate data can be obtained if a future demand period is specified and they suggest to use the 2021 SAFE survey as a benchmark.

This capstone project is the sixth conducted by the EIF with students from the LSE’s Master of Public Administration. Click here for the presentation and here for the full list of capstones.