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Good Connections: Bank Specialization and the Tariff Elasticity of Exports

Author

Listed:
  • Berthou Antoine,
  • Mayer Thierry,
  • Mésonnier Jean-Stéphane.

Abstract

In this paper, we show that exporters react more strongly to a cut in tariffs by a distant country when their banks have already been specializing in funding exports to this country. To make our case, we build upon a theoretical model where an informational advantage provided by the exporter's bank results in a lower distribution cost in the destination country. We test the implications of this model for French exporters using the 2011 free trade agreement between the European Union and South-Korea as a quasi-natural experiment. We measure a bank's specialization in Korea using granular information on bank-firm credit lines and firm-level exports in the years preceding the agreement. We assess how customers of different banks react to this trade liberalization episode using detailed information on the bilateral tariff cuts and disaggregated data on French export flows at the firm-product level. We find robust evidence that the specialized lenders help exporters to respond more strongly to changes in tariffs. The effect is strong for all firms along the extensive margin, but only for less productive exporters along the intensive margin.

Suggested Citation

  • Berthou Antoine, & Mayer Thierry, & Mésonnier Jean-Stéphane., 2021. "Good Connections: Bank Specialization and the Tariff Elasticity of Exports," Working papers 814, Banque de France.
  • Handle: RePEc:bfr:banfra:814
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade Elasticities; Bank Specialization; Trade Liberalization.;
    All these keywords.

    JEL classification:

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

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