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Time to ship during financial crises

  • Nicolas Berman
  • José de Sousa
  • Philippe Martin
  • Thierry Mayer

We show that the negative impact of financial crises on trade is magnified for destinations with longer time-to-ship. A simple model where exporters react to an increase in the probability of default of importers by increasing their export price and decreasing their export volumes to destinations in crisis is consistent with this empirical finding. For longer shipping time, those effects are indeed magnified as the probability of default increases as time passes. Some exporters also decide to stop exporting to the crisis destination, the more so the longer time-to-ship. Using aggregate data from 1950 to 2009, we find that this magnification effect is robust to alternative specifications, samples and inclusion of additional controls, including distance. The firm level predictions are also broadly consistent with French exporter data from 1995 to 2005.

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Paper provided by CEPII research center in its series Working Papers with number 2012-25.

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Date of creation: Oct 2012
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Handle: RePEc:cii:cepidt:2012-25
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  1. Nicolas Berman & Philippe Martin, 2012. "The Vulnerability of Sub-Saharan Africa to Financial Crises: The Case of Trade," IMF Economic Review, Palgrave Macmillan, vol. 60(3), pages 329-364, September.
  2. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
  3. de Sousa, José & Mayer, Thierry & Zignago, Soledad, 2012. "Market access in global and regional trade," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 1037-1052.
  4. Julien Martin, 2009. "Spatial Price Discrimination in International Markets," Working Papers 2009-21, CEPII research center.
  5. Virgiliu Midrigan & Joseph Kaboski & George Alessandria, 2010. "The Great Trade Collapse of 2008-09: An Inventory Adjustment?," 2010 Meeting Papers 107, Society for Economic Dynamics.
  6. Jonathan Eaton & Sam Kortum & Brent Neiman & John Romalis, 2010. "Trade and the global recession," Working Paper Research 196, National Bank of Belgium.
  7. Logan Lewis & Linda Tesar & Andrei Levchenko, 2010. "The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun," 2010 Meeting Papers 109, Society for Economic Dynamics.
  8. Kalina Manova & Zhiwei Zhang, 2009. "Export Prices Across Firms and Destinations," NBER Working Papers 15342, National Bureau of Economic Research, Inc.
  9. Antràs, Pol & Foley, C. Fritz, 2011. "Poultry in Motion: A Study of International Trade Finance Practices," CEPR Discussion Papers 8422, C.E.P.R. Discussion Papers.
  10. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper 2005-03, Federal Reserve Bank of Atlanta.
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  12. Davin Chor & Kalina Manova, 2010. "Off the Cliff and Back? Credit Conditions and International Trade during the Global Fnancial Crisis," NBER Chapters, in: Market Institutions and Financial Market Risk National Bureau of Economic Research, Inc.
  13. repec:spo:wpecon:info:hdl:2441/9261 is not listed on IDEAS
  14. Márcio Valério Ronci, 2004. "Trade Finance and Trade Flows; Panel Data Evidence From 10 Crises," IMF Working Papers 04/225, International Monetary Fund.
  15. Fernando Leibovici & Michael E. Waugh, 2014. "International Trade and Intertemporal Substitution," NBER Working Papers 20498, National Bureau of Economic Research, Inc.
  16. Bricongne, Jean-Charles & Fontagné, Lionel & Gaulier, Guillaume & Taglioni, Daria & Vicard, Vincent, 2012. "Firms and the global crisis: French exports in the turmoil," Journal of International Economics, Elsevier, vol. 87(1), pages 134-146.
  17. JaeBin Ahn, 2011. "A Theory of Domestic and International Trade Finance," IMF Working Papers 11/262, International Monetary Fund.
  18. Guimaraes, Paulo & Portugal, Pedro, 2009. "A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects," IZA Discussion Papers 3935, Institute for the Study of Labor (IZA).
  19. George Alessandria & Joseph P. Kaboski & Virgiliu Midrigan, 2010. "The great trade collapse of 2008-2009: an inventory adjustment?," Working Papers 10-18, Federal Reserve Bank of Philadelphia.
  20. Abdul Abiad & Petia Topalova & Prachi Mishra, 2011. "How Does Trade Evolve in the Aftermath of Financial Crises?," IMF Working Papers 11/3, International Monetary Fund.
  21. Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "From Financial Crash to Debt Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 1676-1706, August.
  22. Schmidt-Eisenlohr, Tim, 2013. "Towards a theory of trade finance," Journal of International Economics, Elsevier, vol. 91(1), pages 96-112.
  23. Tim Schmidt-Eisenlohr, 2011. "Towards a Theory of Trade Finance," Economics Series Working Papers 583, University of Oxford, Department of Economics.
  24. Andrei A. Levchenko & Logan T. Lewis & Linda L. Tesar, 2010. "The Role of Financial Factors in the Trade Collapse: A Skeptic's View," Working Papers 616, Research Seminar in International Economics, University of Michigan.
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