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Dynamic response of bank-intermediated trade finance to a global liquidity shock

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  • Sangyeon Hwang

Abstract

This paper investigates the bank-level responses of a bank-intermediated instrument of trade finance to a negative global liquidity shock in Korea. Using a factor-augmented vector autoregression approach, the results show that there exists significant heterogeneity in bank-level trade-finance responses to a global liquidity shock. In addition, we find that the source of the heterogeneity is the bank-level foreign currency liquidity condition; banks with a better foreign currency liquidity condition may dampen the negative impact of a global liquidity shock on trade-finance.

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  • Sangyeon Hwang, 2019. "Dynamic response of bank-intermediated trade finance to a global liquidity shock," Applied Economics Letters, Taylor & Francis Journals, vol. 26(12), pages 987-994, July.
    • Handle: RePEc:taf:apeclt:v:26:y:2019:i:12:p:987-994
    DOI: 10.1080/13504851.2018.1527438
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