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Cross-border Trade Credit and Trade Flows During the Global Financial Crisis

Author

Listed:
  • Moon Jung Choi

    (Economic Research Institute, Bank of Korea)

  • Sangyeon Hwang

    (Department of Economics, Incheon National University)

  • Hyejoon Im

    (School of Economics & Finance, Yeungnam University)

Abstract

Cross-border trade credit is credit extended by exporters and importers and makes up a considerable share of the trade finance instruments used in global trade. We use quarterly data on cross-border trade credit recorded in the International Investment Position at the International Monetary Fund and examine its effects on trade flows during the 2008-09 global financial crisis. Unlike previous studies, we find not only that the effects of trade credit are positive on average, but also that these effects are more pronounced during the crisis. Specifically, we find that the decrease in trade credit explains 8.9%-10.5% of the trade collapse during the crisis. In addition, we find that the effects of trade credit on trade flows are more pronounced during the crisis for countries with a low level of financial development in the pre-crisis period.

Suggested Citation

  • Moon Jung Choi & Sangyeon Hwang & Hyejoon Im, 2020. "Cross-border Trade Credit and Trade Flows During the Global Financial Crisis," Working Papers 2020-14, Economic Research Institute, Bank of Korea.
    • Handle: RePEc:bok:wpaper:2014
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    Cited by:

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    2. Rashika Mudunkotuwa & Mingjun Ji & T. S. G. Peiris & Yapa Mahinda Bandara & Narthsirinth Netirith, 2025. "Forecasting throughput at a transshipment hub under trade dynamism and uncertainty in major production centers," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 27(2), pages 373-403, June.
    3. Junguo Hua & Hui Li & Zejun He & Jing Ding & Futong Jin, 2022. "The Microcosmic Mechanism and Empirical Test of Uncertainty on the Non-Linear Fluctuation of Chinese Grain Prices-Based on the Perspective of Global Economic Policy Uncertainty," Agriculture, MDPI, vol. 12(10), pages 1-17, September.
    4. Ngoc Thang Doan & Huong Giang Mai, 2025. "Trade credit and global value chains," International Economics and Economic Policy, Springer, vol. 22(2), pages 1-32, May.

    More about this item

    Keywords

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G01 - Financial Economics - - General - - - Financial Crises
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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