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Financial Frictions and Export Dynamics

Author

Listed:
  • Michal Szkup

    (New York University)

  • Fernando Leibovici

    (New York University)

  • David Kohn

    (New York University)

Abstract

This paper studies the relationship between firm export dynamics and financial constraints in a small open economy model. Robust findings in the literature show that new exporters begin by exporting very small quantities, with most of them exiting the foreign market soon after. However, those that survive expand very rapidly and are much less likely to exit. As reported by Ruhl and Willis (2008a), standard trade models with heterogeneous firms cannot replicate these facts. We add borrowing constraints to an otherwise standard model and calibrate it using microdata on export dynamics. We find that financial constraints can largely account for the decreasing hazard rate and the increasing export volume of new exporters. We then provide empirical evidence supporting this mechanism and study its implications for understanding the effects of a large devaluation on aggregate exports.

Suggested Citation

  • Michal Szkup & Fernando Leibovici & David Kohn, 2011. "Financial Frictions and Export Dynamics," 2011 Meeting Papers 1014, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:1014
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Berman, Nicolas & Berthou, Antoine & Héricourt, Jérôme, 2015. "Export dynamics and sales at home," Journal of International Economics, Elsevier, vol. 96(2), pages 298-310.
    2. 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.).
    3. Alfaro, Laura & Cunat, Alejandro & Fadinger, Harald & Yanping, Liu, 2017. "The real exchange rate, innovation and productivity," Working Papers 17-04, University of Mannheim, Department of Economics.
    4. David Kohn & Fernando Leibovici & Michal Szkup, 2015. "Financial Frictions and Export Dynamics in Large Devaluations," Department of Economics Working Papers 2015_2, Universidad Torcuato Di Tella.
    5. Pauline Bourgeon & Jean-Charles Bricongne & Guillaume Gaulier, 2012. "Financing Time to Trade: Evidence from French firms," Documents de travail du Centre d'Economie de la Sorbonne 12016, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    6. Cebreros Zurita Carlos Alfonso, 2016. "The Rewards of Self-Discovery: Learning and Firm Exporter Dynamics," Working Papers 2016-08, Banco de México.
    7. JaeBin Ahn & Alexander McQuoid, 2013. "Capacity Constrained Exporters: Micro Evidence and Macro Implications," Working Papers 1301, Florida International University, Department of Economics.
    8. Fabrice Defever & Alejandro Riano, 2017. "Twin peaks," Discussion Papers 2017-15, University of Nottingham, GEP.
    9. Muûls, Mirabelle, 2015. "Exporters, importers and credit constraints," Journal of International Economics, Elsevier, vol. 95(2), pages 333-343.
    10. Bouët, Antoine & Vaubourg, Anne-Gaël, 2015. "Financial constraints and international trade with endogenous mode of competition:," IFPRI discussion papers 1438, International Food Policy Research Institute (IFPRI).
    11. Kim J. Ruhl & Jonathan L. Willis, 2017. "New Exporter Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 703-726, August.
    12. Alexander F. McQuoid & JaeBin Ahn, 2015. "Capacity Constrained Exporters: Identifying Increasing Marginal Cost," Departmental Working Papers 49, United States Naval Academy Department of Economics.
    13. C. Fritz Foley & Kalina Manova, 2015. "International Trade, Multinational Activity, and Corporate Finance," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 119-146, August.
    14. Goksel, Turkmen, 2012. "Financial constraints and international trade patterns," Economic Modelling, Elsevier, vol. 29(6), pages 2222-2225.
    15. repec:hal:journl:halshs-00677343 is not listed on IDEAS
    16. Alexander McQuoid & Loris Rubini, 2014. "Trade Costs and Markups," Documentos de Trabajo 454, Instituto de Economia. Pontificia Universidad Católica de Chile..
    17. Alexander McQuoid & Loris Rubini, 2014. "The Opportunity Cost of Exporting," 2014 Meeting Papers 412, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • 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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