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Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data

Author

Listed:
  • Paravisini, Daniel

    (Columbia GSB)

  • Rappoport, Veronica

    (Columbia GSB)

  • Schnabl, Philipp

    (NYU Stern)

  • Wolfenzon, Daniel

    (Columbia GSB)

Abstract

This paper presents evidence on the effect of credit supply shocks on exports. Capital flow reversals in Peru during the 2008 financial crisis induced a decline in the supply of credit by domestic banks with high share of foreign-currency denominated liabilities. We use this variation to estimate the elasticity of exports to bank credit. We use matched customs and firm-level bank credit data to control for non-credit related factors that may also affect the level of exports: we compare changes in exports of the same product and to the same destination by firms borrowing from different banks. Exports react strongly to changes in the supply of credit in the intensive margin, irrespectively of the firms' export volume. In the extensive margin, the negative credit supply shock increases the probability of exiting a product-destination export market, but does not significantly affect the number of firms entering an export market. The magnitude of the respective elasticities, as well as their heterogeneity across firm and export flow observable characteristics, are estimated.

Suggested Citation

  • 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.
  • Handle: RePEc:rbp:wpaper:2010-022
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    References listed on IDEAS

    as
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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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