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The Relationship Between Exports, Credit Risk And Credit Guarantees

  • Rienstra-Munnicha, Paul
  • Turvey, Calum G.
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    This paper provides an understanding of how the export credit worthiness of an importing country affects export sales of agricultural and other manufactured products and how export credit guarantees or insurance can mitigate risks of non-payment. A theoretical model is developed. It shows how risk mitigation through export credit insurance could increase exports to high risk importing countries. The key result is that the export response curve is more inelastic in the presence of payment risk, and the effect of insurance is to make the export curve more elastic. Statistical evidence supports this fundamental premise.

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    File URL: http://purl.umn.edu/34115
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    Paper provided by University of Guelph, Department of Food, Agricultural and Resource Economics in its series Working Papers with number 34115.

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    Date of creation: 2002
    Date of revision:
    Handle: RePEc:ags:uguewp:34115
    Contact details of provider: Web page: http://fare.uoguelph.ca/

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    1. James E. Anderson & John G. Riley, 1973. "International Trade With Fluctuating Prices," UCLA Economics Working Papers 040, UCLA Department of Economics.
    2. Filip Abraham & Gerda Dewit, 2000. "Export Promotion Via Official Export Insurance," Open Economies Review, Springer, vol. 11(1), pages 5-26, January.
    3. Brainard, William C. & Cooper, Richard N., 1968. "Uncertainty and Diversification in International Trade," Food Research Institute Studies, Stanford University, Food Research Institute, issue 03.
    4. Grinols, Earl L, 1985. "Trade, Distortions, and Welfare under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 37(3), pages 362-74, September.
    5. Gerda Dewit, 1996. "Export Insurance Subsidisation: Risk Coverage, Strategic Export Promotion or Aid?," Working Papers 9614, Business School - Economics, University of Glasgow.
    6. Ruffin, Roy J., 1974. "International trade under uncertainty," Journal of International Economics, Elsevier, vol. 4(3), pages 243-259, August.
    7. Howard D. Leathers, 2001. "Agricultural Export Subsidies as a Tool of Trade Strategy: Before and after the Federal Agricultural Improvement and Reform Act of 1996," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(1), pages 209-221.
    8. Eaton, Jonathan, 1979. "The Allocation of Resources in an Open Economy with Uncertain Terms of Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 391-403, June.
    9. Rude, James, 2000. "Reform of Agricultural Export Credit Programs," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 1(01).
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