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EXIM’s Exit: The Real Effects of Trade Financing by Export Credit Agencies

Author

Listed:
  • Poorya Kabir
  • Adrien Matray
  • Karsten Müller
  • Chenzi Xu

Abstract

We study the role of export credit agencies—the predominant tool of industrial policy—on firm behavior by using the effective shutdown of the Export-Import Bank of the United States (EXIM) from 2015-2019 as a natural experiment. We show that firms that previously relied on EXIM support saw a 18% drop in global sales after the agency closed down, driven by a reduction in exports. Firms affected by the shutdown were unable to make up for the loss of trade financing, especially if they were financially constrained, and consequently laid off employees and curtailed investment. These negative effects were more pronounced for firms with higher export opportunities and higher ex-ante marginal revenue products of capital. Lower exports at the firm level aggregate up to lower total exports for industries most reliant on EXIM support. These findings suggest that government policies aimed at providing trade financing can boost exports and firm growth even in countries with well-developed financial markets without necessarily leading to a misallocation of resources.

Suggested Citation

  • Poorya Kabir & Adrien Matray & Karsten Müller & Chenzi Xu, 2024. "EXIM’s Exit: The Real Effects of Trade Financing by Export Credit Agencies," NBER Working Papers 32019, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32019
    Note: ITI
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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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