Journal Article

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

Daniel Paravisini, Veronica Rappoport, Philipp Schnabl and Daniel Wolfenzon

in The Review of Economic Studies

Volume 82, issue 1, pages 333-359
Published in print January 2015 | ISSN: 0034-6527
Published online September 2014 | e-ISSN: 1467-937X | DOI: https://dx.doi.org/10.1093/restud/rdu028
Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data

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  • International Trade
  • Banking
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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.

Keywords: Trade finance; Lending channel; Financial crisis; F10; F40; G01; G21

Journal Article.  13747 words.  Illustrated.

Subjects: International Trade ; Banking ; Economics ; Macroeconomic Aspects of International Trade and Finance

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