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Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data

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Listed:
  • Daniel Paravisini
  • Veronica Rappoport
  • Philipp Schnabl
  • Daniel Wolfenzon

Abstract

We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital-flow reversals during the 2008 financial crisis. We find that credit shocks affect the intensive margin of exports, but have no significant impact on entry or exit of firms to new product and destination markets. Our results suggest that credit shortages reduce exports through raising the variable cost of production, rather than the cost of financing sunk entry investments.

Suggested Citation

  • Daniel Paravisini & Veronica Rappoport & Philipp Schnabl & Daniel Wolfenzon, 2015. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 333-359.
    • Handle: RePEc:oup:restud:v:82:y:2015:i:1:p:333-359
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    File URL: http://hdl.handle.net/10.1093/restud/rdu028
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    JEL classification:

    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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