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How Do Banking Crises Affect Bilateral Exports?

Author

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  • Youssouf Kiendrebeogo

    (CERDI - Centre d'Études et de Recherches sur le Développement International - UdA - Université d'Auvergne - Clermont-Ferrand I - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper investigates whether banking crises are associated with declines in bilateral exports. We first develop a simple open economy model in which banking crises translate into negative liquidity shocks, leading to collapses in exports through supply-side and demand-side shocks. We then estimate a gravity model using a sample of developed and developing countries over the period 1988-2010. The results suggest that crisis-hit countries experience lower levels of bilateral exports, particularly in developing countries where supply-side shocks are found to be relatively more important than demand shocks. In developing countries, exports of manufactured goods are disproportionately hurt by banking crises and this negative effect is stronger in industries relying more on external finance. These findings are robust to correcting for potential endogeneity, to changes in the sample, and to alternative estimation methods.

Suggested Citation

  • Youssouf Kiendrebeogo, 2013. "How Do Banking Crises Affect Bilateral Exports?," CERDI Working papers halshs-00843009, HAL.
    • Handle: RePEc:hal:cdiwps:halshs-00843009
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00843009
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    Cited by:

    1. is not listed on IDEAS
    2. Mr. Daniel Leigh & Weicheng Lian & Mr. Marcos Poplawski Ribeiro & Rachel Szymanski & Viktor Tsyrennikov & Hong Yang, 2017. "Exchange Rates and Trade: A Disconnect?," IMF Working Papers 2017/058, International Monetary Fund.

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    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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