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Financing constraints, firm dynamics, and international trade

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  • Stephane Verani
  • Till Gross

Abstract

There is growing empirical support for the conjecture that access to credit is an important determinant of firms' export decisions. We study a multi-country general equilibrium economy in which entrepreneurs and lenders engage in long-term credit relationships. Financial constraints arise in consequence of financials contracts that are optimal given information asymmetry. Consistent with empirical regularities, as firm age and size increase, the model implies decreasing mean and variance of fi rm growth and increasing fi rm survival. Exporters are larger, their survival in international markets increases with the time spent exporting, and the sales of older exporters are larger and more stable.

Suggested Citation

  • Stephane Verani & Till Gross, 2012. "Financing constraints, firm dynamics, and international trade," Finance and Economics Discussion Series 2012-68, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2012-68
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    Cited by:

    1. Uusküla, Lenno, 2016. "Monetary transmission mechanism with firm turnover," Journal of Macroeconomics, Elsevier, vol. 50(C), pages 1-18.
    2. Fernando Leibovici, 2013. "Financial Development and International Trade," 2013 Meeting Papers 532, Society for Economic Dynamics.
    3. David Kohn & Fernando Leibovici & Michal Szkup, 2016. "Financial Frictions And New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 453-486, May.
    4. Lenno Uuskula, 2015. "Firm turnover and inflation dynamics," Bank of Estonia Working Papers wp2015-01, Bank of Estonia, revised 03 Feb 2015.

    More about this item

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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