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Time to ship during Financial Crisis

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  • Nicolas Berman

    (Centre d'économie de la Sorbonne)

  • José de Sousa

    (Université Panthéon-Sorbonne - Paris I)

  • Thierry Mayer

    (Département d'économie)

  • Philippe Martin

    (Département d'économie)

Abstract

We show that the negative impact of financial crises on trade is magnified for destinations with longer time-to-ship. A simple model where exporters react to an increase in the probability of default of importers by increasing their export price and decreasing their export volumes to destinations in crisis is consistent with this empirical finding. For longer shipping time, those effects are indeed magnified as the probability of default increases as time passes. Some exporters also decide to stop exporting to the crisis destination, the more so the longer time-to-ship. Using aggregate data from 1950 to 2009, we found that this magnification effect is robust to alternative specifications, samples and inclusion of additional controls, including distance. The form level predictions are also broadly consistent with French exporter data from 1995 to 2005.

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Bibliographic Info

Paper provided by Sciences Po Departement of Economics in its series Sciences Po Economics Discussion Papers with number 2013-14.

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Date of creation: Sep 2013
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Handle: RePEc:spo:wpecon:info:hdl:2441/6ggbvnr6munghes9oc1hne632

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Keywords: Time-to-ship; Financial crises; international trade;

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References

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  1. Paulo Guimarães & Pedro Portugal, 2009. "A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects," Working Papers w200909, Banco de Portugal, Economics and Research Department.
  2. de Sousa, J. & Mayer, T. & Zignago, S., 2011. "Market access in global and regional trade," Working papers 358, Banque de France.
  3. Andrei A. Levchenko & Logan T. Lewis & Linda L. Tesar, 2010. "The Role of Financial Factors in the Trade Collapse: A Skeptic's View," Working Papers 616, Research Seminar in International Economics, University of Michigan.
  4. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "From Financial Crash to Debt Crisis," NBER Working Papers 15795, National Bureau of Economic Research, Inc.
  5. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
  6. Baier, Scott L. & Bergstrand, Jeffrey H., 2007. "Do free trade agreements actually increase members' international trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 72-95, March.
  7. Helene Rey & Philippe Martin, 2005. "Globalization and Emerging Markets: With or Without Crash?," 2005 Meeting Papers 152, Society for Economic Dynamics.
  8. Eaton, Jonathan & Kortum, Sam & Neiman, Brent & Romalis, John, 2013. "Trade and the Global Recession," Working Papers 2013-21, University of Sydney, School of Economics.
  9. Tim Schmidt-Eisenlohr, 2011. "Towards a Theory of Trade Finance," Economics Series Working Papers 583, University of Oxford, Department of Economics.
  10. Nicolas Berman & Philippe Martin, 2012. "The Vulnerability of Sub-Saharan Africa to Financial Crises: The Case of Trade," IMF Economic Review, Palgrave Macmillan, vol. 60(3), pages 329-364, September.
  11. Davin Chor & Kalina Manova, 2010. "Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis," NBER Working Papers 16174, National Bureau of Economic Research, Inc.
  12. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
  13. Logan Lewis & Linda Tesar & Andrei Levchenko, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," 2010 Meeting Papers 109, Society for Economic Dynamics.
  14. Virgiliu Midrigan & Joseph Kaboski & George Alessandria, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," 2010 Meeting Papers 107, Society for Economic Dynamics.
  15. Julien Martin, 2009. "Spatial Price Discrimination in International Markets," Working Papers 2009-21, CEPII research center.
  16. Kalina Manova & Zhiwei Zhang, 2012. "Export Prices Across Firms and Destinations," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 379-436.
  17. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The great trade collapse of 2008-2009: an inventory adjustment?," Working Papers 10-18, Federal Reserve Bank of Philadelphia.
  18. repec:spo:wpecon:info:hdl:2441/9261 is not listed on IDEAS
  19. JaeBin Ahn, 2011. "A Theory of Domestic and International Trade Finance," IMF Working Papers 11/262, International Monetary Fund.
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Cited by:
  1. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2013. "Are clusters more resilient in crises? Evidence from French exporters in 2008-2009," CEPR Discussion Papers 9667, C.E.P.R. Discussion Papers.
  2. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2012. "The Great Trade Collapse," NBER Working Papers 18632, National Bureau of Economic Research, Inc.
  3. Pauline Bourgeon & Jean-Charles Bricongne & Guillaume Gaulier, 2012. "Financing time to trade : Evidence from French firms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00677343, HAL.
  4. repec:hal:journl:halshs-00677343 is not listed on IDEAS
  5. Nicolas Berman & Philippe Martin, 2012. "The Vulnerability of Sub-Saharan Africa to Financial Crises: The Case of Trade," IMF Economic Review, Palgrave Macmillan, vol. 60(3), pages 329-364, September.

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