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International Trade Finance and Exports: Evidence from Korean Bank-Intermediated Trade Finance Instruments

Author

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  • Sangyeon Hwang

    () (Incheon National University)

  • Hyejoon Im

    () (Yeungnam University)

Abstract

Abstract This paper investigates the effects of trade finance shocks on real exports by using novel data on two bank-intermediated instruments of trade finance in Korea: foreign trade loans extended by commercial banks and documentary bills purchased by them. Using a vector autoregression (VAR) model, the results show that a negative shock to both instruments adversely affects exports, particularly the exports of small and medium-sized enterprises (SMEs). The trade financing condition explains as much as 10–14 % of the variation in exports, which is comparable to the estimates in previous studies. Noteworthy is that the effects of trade finance on SME exports vary upon whether it is pre- or post-shipment financing.

Suggested Citation

  • Sangyeon Hwang & Hyejoon Im, 2017. "International Trade Finance and Exports: Evidence from Korean Bank-Intermediated Trade Finance Instruments," Open Economies Review, Springer, vol. 28(2), pages 319-346, April.
  • Handle: RePEc:kap:openec:v:28:y:2017:i:2:d:10.1007_s11079-016-9423-y
    DOI: 10.1007/s11079-016-9423-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade finance; Exports; Loan; Documentary bill; SMEs; Financial crisis;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F19 - International Economics - - Trade - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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