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Financing constraints, firm dynamics, and international trade

  • Stephane Verani
  • Till Gross

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 as a consequence of financial contracts that are optimal under private information. Consistent with empirical regularities, the model implies that older and larger firms have lower average and more stable growth rates, and are more likely to survive. 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.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2013-02.

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Date of creation: 2013
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Handle: RePEc:fip:fedgfe:2013-02
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