The impact of bank interest rate deregulations on firm exports: Evidence from China

We exploit a quasi-natural experiment in China, where the deregulation of bank interest rates in 2013 increased the availability of bank credit, to identify the impact of credit constraints on firm exports. Using a difference-in-differences estimation strategy, we find that firms experienced significant increases in export values post-2013 compared to prior years. We also show that credit constraints are an important pathway from the deregulation of bank interest rates to export values growth. To isolate the export-specific effects of the deregulation, we analyze its impact on the intensive and extensive margins of exports. Our findings indicate that firms increased their export values within existing country-product markets, diversified their product ranges, and entered additional foreign markets following the deregulation. These results suggest that firms faced financing constraints on both fixed and variable export costs, as evidenced by the changes in intensive and extensive margins.