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Dissecting the effect of credit supply on trade: evidence from matched credit-export data

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  • Paravisini, Daniel
  • Rappoport, Veronica
  • Schnabl, Philipp
  • Wolfenzon, Daniel

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

  • Paravisini, Daniel & Rappoport, Veronica & Schnabl, Philipp & Wolfenzon, Daniel, 2015. "Dissecting the effect of credit supply on trade: evidence from matched credit-export data," LSE Research Online Documents on Economics 59575, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:59575
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    More about this item

    Keywords

    trade finance; lending channel; financial crisis;
    All these keywords.

    JEL classification:

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

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