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Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage

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  • Keuschnigg, Christian
  • Kogler, Michael

Abstract

Trade and innovation cause structural change. Productive factors must flow from declining to growing industries. Banks play a major role in cutting credit to non-viable firms in downsizing sectors and provide new credit to finance investment in expanding, innovative sectors. Structural parameters of a country’s banking system thus influence comparative advantage and trade patterns. The analysis points to the importance of insolvency laws, minimum capital standards, and cost of bank equity to determine credit reallocation, sectoral expansion and trade patterns.

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  • Keuschnigg, Christian & Kogler, Michael, 2018. "Trade and Credit Reallocation: How Banks Help Shape Comparative Advantage," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181571, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc18:181571
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    More about this item

    Keywords

    Capital reallocation; banking; trade; comparative advantage;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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