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The Relationship Between Exports, Credit Risk And Credit Guarantees

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  • Rienstra-Munnicha, Paul
  • Turvey, Calum G.
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    Abstract

    This paper provides an understanding of how the export credit worthiness of an importing country affects export sales of agricultural and other manufactured products and how export credit guarantees or insurance can mitigate risks of non-payment. A theoretical model is developed. It shows how risk mitigation through export credit insurance could increase exports to high risk importing countries. The key result is that the export response curve is more inelastic in the presence of payment risk, and the effect of insurance is to make the export curve more elastic. Statistical evidence supports this fundamental premise.

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    File URL: http://purl.umn.edu/34115
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    Bibliographic Info

    Paper provided by University of Guelph, Department of Food, Agricultural and Resource Economics in its series Working Papers with number 34115.

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    Date of creation: 2002
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    Handle: RePEc:ags:uguewp:34115

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    Web page: http://fare.uoguelph.ca/
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    Related research

    Keywords: International Relations/Trade;

    References

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    1. Gerda Dewit, 1996. "Export Insurance Subsidisation: Risk Coverage, Strategic Export Promotion or Aid?," Working Papers 9611, Business School - Economics, University of Glasgow.
    2. Eaton, Jonathan, 1979. "The Allocation of Resources in an Open Economy with Uncertain Terms of Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 391-403, June.
    3. James E. Anderson & John G. Riley, 1973. "International Trade With Fluctuating Prices," UCLA Economics Working Papers 040, UCLA Department of Economics.
    4. Grinols, Earl L, 1985. "Trade, Distortions, and Welfare under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 37(3), pages 362-74, September.
    5. Ruffin, Roy J., 1974. "International trade under uncertainty," Journal of International Economics, Elsevier, vol. 4(3), pages 243-259, August.
    6. Brainard, William C. & Cooper, Richard N., 1968. "Uncertainty and Diversification in International Trade," Food Research Institute Studies, Stanford University, Food Research Institute, issue 03.
    7. Howard D. Leathers, 2001. "Agricultural Export Subsidies as a Tool of Trade Strategy: Before and after the Federal Agricultural Improvement and Reform Act of 1996," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 209-221.
    8. Filip Abraham & Gerda Dewit, 2000. "Export Promotion Via Official Export Insurance," Open Economies Review, Springer, vol. 11(1), pages 5-26, January.
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    Cited by:
    1. Christoph Moser & Thorsten Nestmann & Michael Wedow, 2008. "Political Risk and Export Promotion: Evidence from Germany," The World Economy, Wiley Blackwell, vol. 31(6), pages 781-803, 06.

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