Banks in international trade finance: evidence from the U.S
Banks play a critical role in facilitating international trade, in particular by reducing the risk of trade transactions. This paper uses unique information on the trade finance business of U.S. banks to document new empirical patterns. The data reveal that banks' trade finance claims differ substantially across destination countries. They are hump-shaped in country credit risk and increase with the time to import of a destination market. The extent to which trading partners use bank guarantees also varies systematically with global conditions, expanding when aggregate risk is higher and funding is cheaper. The response of bank trade finance to changes in these macro factors is heterogeneous, however. In countries with intermediate levels of credit risk, which rely the most on bank guarantees, bank trade finance adjusts the least. We show that a modification of the standard model of payment contract choice in international trade is needed to rationalize these empirical findings.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: 33 Liberty Street, New York, NY 10045-0001|
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Web: http://www.ny.frb.org/rmaghome/staff_rp/ Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Felici Roberto & Pagnini Marcello, 2005. "Distance, bank heterogeneity and entry in local banking markets," Temi di discussione (Economic working papers) 557, Bank of Italy, Economic Research and International Relations Area.
- Andreas Hoefele & Tim Schmidt-Eisenlohr & Zihong Yu, 2013.
"Payment Choice in International Trade: Theory and Evidence from Cross-country Firm Level Data,"
Discussion Paper Series
2013_11, Department of Economics, Loughborough University, revised Oct 2013.
- Andreas Hoefele & Tim Schmidt-Eisenlohr & Zhihong Yu, 2013. "Payment Choice in International Trade: Theory and Evidence from Cross-country Firm Level Data," CESifo Working Paper Series 4350, CESifo Group Munich.
- Friederike Niepmann, 2013.
"Banking across Borders,"
CESifo Working Paper Series
4120, CESifo Group Munich.
- Friederike Niepmann, 2012. "Banking across borders," Staff Reports 576, Federal Reserve Bank of New York.
- Niepmann, Friederike, 2013. "Banking across borders," Discussion Papers 19/2013, Deutsche Bundesbank, Research Centre.
- Friederike Niepmann, 2011. "Banking across Borders," DNB Working Papers 325, Netherlands Central Bank, Research Department.
- Thomas William Dorsey & Mika Saito & Armine Khachatryan & Irena Asmundson & Ioana Niculcea, 2011. "Trade and Trade Finance in the 2008-09 Financial Crisis," IMF Working Papers 11/16, International Monetary Fund.
- Hummels, David, 2001.
"Time as a Trade Barrier,"
GTAP Working Papers
1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Silvia Del Prete & Stefano Federico, 2014. "Trade and finance: is there more than just 'trade finance'? Evidence from matched bank-firm data," Temi di discussione (Economic working papers) 948, Bank of Italy, Economic Research and International Relations Area.
- Daniel Paravisini & Veronica Rappoport & Philipp Schnabl & Daniel Wolfenzon, 2011.
"Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data,"
NBER Working Papers
16975, National Bureau of Economic Research, Inc.
- Paravisini, Daniel & Rappoport, Veronica & Schnabl, Philipp & Wolfenzon, Daniel, 2010. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data," Working Papers 2010-022, Banco Central de Reserva del Perú.
- Beck, Thorsten, 2002.
"Financial development and international trade: Is there a link?,"
Journal of International Economics,
Elsevier, vol. 57(1), pages 107-131, June.
- Beck, Thorsten, 2001. "Financial development and international trade : is there a link?," Policy Research Working Paper Series 2608, The World Bank.
- JaeBin Ahn, 2011. "A Theory of Domestic and International Trade Finance," IMF Working Papers 11/262, International Monetary Fund.
When requesting a correction, please mention this item's handle: RePEc:fip:fednsr:633. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber)
If references are entirely missing, you can add them using this form.