Advanced Search
MyIDEAS: Login to save this paper or follow this series

Financial Choice in a Non-Ricardian Model of Trade

Contents:

Author Info

  • Katheryn N. Russ
  • Diego Valderrama

Abstract

We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing. We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w15528.pdf
Download Restriction: no

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15528.

as in new window
Length:
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:nbr:nberwo:15528

Note: ITI
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Razin, Assaf & Sadka, Efraim, 2006. "Foreign Direct Investment: Analysis of Aggregate Flows," MPRA Paper 21916, University Library of Munich, Germany.
  2. Katherine Smith & Diego Valderrama, 2007. "The composition of capital flows when emerging market firms face financing constraints," 2007 Meeting Papers, Society for Economic Dynamics 533, Society for Economic Dynamics.
  3. Manova, Kalina, 2008. "Credit constraints, equity market liberalizations and international trade," Journal of International Economics, Elsevier, Elsevier, vol. 76(1), pages 33-47, September.
  4. Kletzer, Kenneth & Bardhan, Pranab, 1986. "Credit Markets and Patterns of International Trade," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1g36f3sd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  5. Sandeep Baliga & Ben Polak, 2001. "The Emergence and Persistence of the Anglo-Saxon and German Financial Systems," Economics Working Papers, Institute for Advanced Study, School of Social Science 0005, Institute for Advanced Study, School of Social Science.
  6. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 157-77, March.
  7. Kim J. Ruhl, 2008. "The International Elasticity Puzzle," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 08-30, New York University, Leonard N. Stern School of Business, Department of Economics.
  8. Robert C. Feenstra & Philip A. Luck & Maurice Obstfeld & Katheryn N. Russ, 2014. "In Search of the Armington Elasticity," NBER Working Papers 20063, National Bureau of Economic Research, Inc.
  9. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  10. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(3), pages 131-154, Summer.
  11. Katheryn N. Russ, 2009. "The New Theory of Foreign Direct Investment: Merging Trade and Capital Flows," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 12(1), pages 107-119, 05.
  12. Charles T. Carlstrom & Timothy S. Fuerst, 2000. "Monetary shocks, agency costs, and business cycles," Working Paper 0011, Federal Reserve Bank of Cleveland.
  13. Stefania Garetto & Jose Luis Fillat, 2010. "Risk, Returns, and Multinational Production," 2010 Meeting Papers, Society for Economic Dynamics 777, Society for Economic Dynamics.
  14. Spulber,Daniel F., 2009. "The Theory of the Firm," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521736602.
  15. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," 2004 Meeting Papers, Society for Economic Dynamics 530, Society for Economic Dynamics.
  16. John D. Burger & Francis E. Warnock, 2006. "Local Currency Bond Markets," NBER Working Papers 12552, National Bureau of Economic Research, Inc.
  17. Levchenko, Andrei A. & Rancière, Romain & Thoenig, Mathias, 2008. "Growth and Risk at the Industry Level: the Real Effects of Financial Liberalization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6715, C.E.P.R. Discussion Papers.
  18. Del Gatto, Massimo & Ottaviano, Gianmarco Ireo Paolo & Pagnini, Marcello, 2007. "Openness to Trade and Industry Cost Dispersion: Evidence from a Panel of Italian Firms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6336, C.E.P.R. Discussion Papers.
  19. Diego Valderrama & Katheryn N. Russ, 2009. "A Theory of Banks, Bonds, and the Distribution of Firm Size," Working Papers, University of California, Davis, Department of Economics 916, University of California, Davis, Department of Economics.
  20. Paula Bustos, 2009. "Trade Liberalization, Exports and Technology Upgrading: Evidence on the Impact of MERCOSUR on Argentinean Firms," 2009 Meeting Papers, Society for Economic Dynamics 1029, Society for Economic Dynamics.
  21. Diamond, Douglas W, 1991. "Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 99(4), pages 689-721, August.
  22. Carlstrom, Charles T & Fuerst, Timothy S, 1997. "Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis," American Economic Review, American Economic Association, American Economic Association, vol. 87(5), pages 893-910, December.
  23. Thomas Chaney, 2013. "Liquidity Constrained Exporters," NBER Working Papers 19170, National Bureau of Economic Research, Inc.
  24. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, Econometric Society, vol. 70(5), pages 1741-1779, September.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:15528. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.