Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data

We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital-flow reversals during the 2008 financial crisis. We find that credit shocks affect the intensive margin of exports, but have no significant impact on entry or exit of firms to new product and destination markets. Our results suggest that credit shortages reduce exports through raising the variable cost of production, rather than the cost of financing sunk entry investments.

[1]  Marco G. Ercolani,et al.  Panel Data Econometrics: Advanced Texts in Econometrics , 2004 .

[2]  Kalina B. Manova,et al.  Credit Constraints, Heterogeneous Firms, and International Trade , 2008 .

[3]  T. Beck.  Financial Dependence and International Trade , 2000 .

[4]  Kalina B. Manova,et al.  Credit Constraints, Heterogeneous Firms and International Trade , 2011 .

[5]  Rajkamal Iyer,et al.  Interbank Contagion at Work: Evidence from a Natural Experiment , 2009, SSRN Electronic Journal.

[6]  Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis , 2009 .

[7]  B. Bernanke,et al.  The Federal Funds Rate and the Channels of Monetary Transnission , 1990 .

[8]  Thierry Verdier,et al.  The Organization of Firms in a Global Economy , 2009 .

[9]  Luigi Zingales,et al.  Financial Dependence and Growth , 1996 .

[10]  Anil K. Kashyap,et al.  Credit Conditions and the Cyclical Behavior of Inventories , 1994 .

[11]  A. Belloni,et al.  SPARSE MODELS AND METHODS FOR OPTIMAL INSTRUMENTS WITH AN APPLICATION TO EMINENT DOMAIN , 2012 .

[12]  Nicola Cetorelli,et al.  Global Banks and International Shock Transmission: Evidence from the Crisis , 2010 .

[13]  Nicolas Berman,et al.  Financial factors and the margins of trade: Evidence from cross-country firm-level data , 2010 .

[14]  New Evidence on the Lending Channel , 2001 .

[15]  Nicola Cetorelli,et al.  Global Banks and International Shock Transmission: Evidence from the Crisis , 2010 .

[16]  Eric S. Rosengren,et al.  Collateral Damage: Effects of the Japanese Bank Crisis on Real Activity in the United States , 2000 .

[17]  Mark J. Roberts,et al.  An Empirical Model of Sunk Costs and the Decision to Export , 1999 .

[18]  P. Schnabl,et al.  The International Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market , 2011 .

[19]  Peter K. Schott,et al.  Multi-Product Firms and Trade Liberalization , 2006 .

[20]  J. Gan.  The Real Effects of Asset Market Bubbles : Loan-and Firm-Level Evidence of a Lending Channel , 2006 .

[21]  J. Peydró,et al.  Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis , 2013 .

[22]  Marc Auboin.  Boosting the availability of trade finance in the current crisis : Background analysis for a substantial G 20 package , 2022 .

[23]  Miguel A. Ferreira,et al.  Lending Relationships and the Effect of Bank Distress: Evidence from the 2007-2009 Financial Crisis , 2013 .

[24]  L. Kaldor.  The World Economic Outlook , 1983 .

[25]  P. Schnabl.  Financial Globalization and the Transmission of Bank Liquidity Shocks: Evidence from an Emerging Market , 2010 .

[26]  Roc Armenter,et al.  A Balls-and-Bins Model of Trade , 2010 .

[27]  B. Bernanke,et al.  Non-Monetary Effects of the Financial Crisis in the Propagation of the Great Depression , 1983 .

[28]  J. Eaton,et al.  Trade and the Global Recession , 2010 .

[29]  Manju Puri,et al.  Global Retail Lending in the Aftermath of the Us Financial Crisis: Distinguishing between Supply and Demand Effects , 2010 .

[30]  Robert C. Johnson,et al.  The Role of Vertical Linkages in the Propagation of the Global Downturn of 2008 ∗ , 2010 .

[31]  V. Cuñat,et al.  Financing Constraints, Firm Dynamics, Export Decisions and Aggregate productivity , 2011 .

[32]  A. Levchenko,et al.  The Collapse of International Trade during the 2008–09 Crisis: In Search of the Smoking Gun , 2010 .

[33]  C. Mulligan,et al.  Selection, Investment, and Women's Relative Wages Over Time , 2008 .

[34]  D. Taglioni,et al.  Firms and the Global Crisis: French Exports in the Turmoil , 2009, SSRN Electronic Journal.

[35]  Morten Olsen.  Banks in International Trade: Incomplete International Contract Enforcement and Reputation∗ , 2010 .

[36]  David E. Weinstein,et al.  Exports and Financial Shocks , 2009 .

[37]  L. Iacovone,et al.  Lessons from the Past , 2009 .

[38]  A. Purnanandam,et al.  Federal Dposit Insurance Corporation • Center for Financial ResearchThe Effect of Banking Crisis on Bank-Dependent Borrowers 1 , 2010 .

[39]  T. Beck.  Financial development and international trade , 2002 .

[40]  Thomas Chaney.  Liquidity Constrained Exporters , 2013 .

[41]  Tim Schmidt-Eisenlohr.  Towards a Theory of Trade Finance , 2010, SSRN Electronic Journal.

[42]  P. Krugman,et al.  Persistent Trade Effects of Large Exchage Rate Shocks , 1986 .

[43]  E. Duflo,et al.  How Much Should We Trust Differences-in-Differences Estimates? , 2001 .

[44]  EORG S CHAUR,et al.  Time as a Trade Barrier , 2013 .

[45]  Kalina B. Manova,et al.  Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis , 2009 .

[46]  J. Eaton,et al.  Export Dynamics in Colombia: Firm-Level Evidence , 2007 .

[47]  Volker Nocke,et al.  Globalization and Multiproduct Firms , 2012 .

[48]  P. Bolton,et al.  A Unified Theory of Tobin's Q, Corporate Investment, Financing, and Risk Management , 2009 .

[49]  T. Beck.  Financial Development and International Trade: Is There a Link? , 1999 .

[50]  Daniel Paravisini.  Local bank financial constraints and firm access to external finance , 2008 .

[51]  J. Peydró,et al.  Local Versus Aggregate Lending Channels: The Effects of Securitization on Corporate Credit Supply in Spain , 2010 .

[52]  T. Mayer,et al.  Time to Ship during Financial Crises , 2012, NBER International Seminar on Macroeconomics.

[53]  Raghuram G. Rajan,et al.  Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt , 1992 .

[54]  M. Friedman,et al.  A Monetary History of the United States , 1963 .

[55]  James E. Rauch,et al.  Networks Versus Markets in International Trade , 1996 .

[56]  Rendigs Fels,et al.  A Monetary History of the United States, 1867-1960. , 1964 .

[57]  A. Levchenko,et al.  The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun , 2010 .

[58]  R. Minetti,et al.  Credit constraints and firm export: Microeconomic evidence from Italy☆ , 2011 .

[59]  Stijn Claessens,et al.  Financial Development, Property Rights and Growth , 2002 .

[60]  Kalina B. Manova,et al.  Credit Constraints, Equity Market Liberalizations and International Trade , 2008 .

[61]  A. Khwaja,et al.  Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market , 2006 .

[62]  Steven A. Sharpe.  Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships , 1990 .

[63]  JaeBin Ahn.  A Theory of Domestic and International Trade Finance , 2011, Emerging Market Finance: New Challenges and Opportunities.

[64]  Kei-Mu Yi,et al.  The Great Trade Collapse , 2012 .

[65]  Pol Antras,et al.  Poultry in Motion: A Study of International Trade Finance Practices , 2011, Journal of Political Economy.

[66]  Ann E. Harrison,et al.  Decomposing the Great Trade Collapse: Products, Prices, and Quantities in the 2008-2009 Crisis , 2010 .

[67]  Globalization and the Gains from Trade , 1998 .

[68]  J. Peydró,et al.  Interbank Liquidity Crunch and the Firm Credit Crunch: Evidence from the 2007-2009 Crisis , 2013 .

[69]  Kei-Mu Yi,et al.  Demand Spillovers and the Collapse of Trade in the Global Recession , 2010, SSRN Electronic Journal.

[70]  Steven Ongena,et al.  Credit Supply and Monetary Policy: Identifying the Bank Balance-Sheet Channel with Loan Applications , 2012 .

[71]  Anil K. Kashyap,et al.  What Do a Million Observations on Banks Say about the Transmission of Monetary Policy , 2000 .

[72]  F. Perri,et al.  Business Cycles in Emerging Economies: The Role of Interest Rates , 2004 .

[73]  Joseph P. Kaboski,et al.  The Great Trade Collapse of 2008–09: An Inventory Adjustment? , 2010 .

[74]  M. Arellano.  Panel Data Econometrics , 2002 .