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Financial Frictions and Export Dynamics

  • Michal Szkup

    (New York University)

  • Fernando Leibovici

    (New York University)

  • David Kohn

    (New York University)

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.

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File URL: https://www.economicdynamics.org/meetpapers/2011/paper_1014.pdf
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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1014.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1014
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page: http://www.EconomicDynamics.org/
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  1. Nicolas Berman & Jérôme Héricourt, 2008. "Financial Factors and the Margins of Trade: Evidence from Cross-Country Firm-Level Data," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00321632, HAL.
  2. Flora Bellone & Patrick Musso & Lionel Nesta & Stefano Schiavo, 2009. "Financial Constraints and Firm Export Behavior," Post-Print halshs-00721070, HAL.
  3. Gian Luca Clementi & Hugo A. Hopenhayn, 2006. "A Theory of Financing Constraints and Firm Dynamics," The Quarterly Journal of Economics, Oxford University Press, vol. 121(1), pages 229-265.
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  5. Guvenen, Fatih, 2006. "Reconciling conflicting evidence on the elasticity of intertemporal substitution: A macroeconomic perspective," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1451-1472, October.
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  8. 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.).
  9. Peter Egger & Michaela Kesina, 2013. "Financial Constraints and Exports: Evidence from Chinese Firms," CESifo Economic Studies, CESifo, vol. 59(4), pages 676-706, December.
  10. Ahn, JaeBin & Khandelwal, Amit K. & Wei, Shang-Jin, 2011. "The role of intermediaries in facilitating trade," Journal of International Economics, Elsevier, vol. 84(1), pages 73-85, May.
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  12. Jonathan Eaton & Samuel Kortum, 2004. "An Anatomy of International Trade: Evidence from French Firms," 2004 Meeting Papers 802, Society for Economic Dynamics.
  13. Jonathan L. Willis & Kim J. Ruhl, 2009. "New Exporter Dynamics," 2009 Meeting Papers 111, Society for Economic Dynamics.
  14. Jonathan Eaton & Marcela Eslava & Maurice Kugler & James Tybout, 2007. "Export Dynamics in Colombia:Firm-Level Evidence," BORRADORES DE ECONOMIA 003957, BANCO DE LA REPÚBLICA.
  15. Costas Arkolakis, 2010. "Market Penetration Costs and the New Consumers Margin in International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(6), pages 1151 - 1199.
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  17. Alessandria, George & Choi, Horag, 2014. "Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization," Journal of International Economics, Elsevier, vol. 94(2), pages 207-223.
  18. Amiti, Mary & Weinstein, David E., 2009. "Exports and Financial Shocks," CEPR Discussion Papers 7590, C.E.P.R. Discussion Papers.
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  24. Pol Antràs & C. Fritz Foley, 2011. "Poultry in Motion: A Study of International Trade Finance Practices," NBER Working Papers 17091, National Bureau of Economic Research, Inc.
  25. Alessandro Dovis & Wyatt Brooks, 2011. "Trade Liberalization with Endogenous Borrowing Constraints," 2011 Meeting Papers 631, Society for Economic Dynamics.
  26. Minetti, Raoul & Zhu, Susan Chun, 2011. "Credit constraints and firm export: Microeconomic evidence from Italy," Journal of International Economics, Elsevier, vol. 83(2), pages 109-125, March.
  27. Blundell, Richard & Meghir, Costas & Neves, Pedro, 1993. "Labour supply and intertemporal substitution," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 137-160, September.
  28. Blum, Bernardo S. & Claro, Sebastian & Horstmann, Ignatius J., 2013. "Occasional and perennial exporters," Journal of International Economics, Elsevier, vol. 90(1), pages 65-74.
  29. Kim J. Ruhl, 2008. "The International Elasticity Puzzle," Working Papers 08-30, New York University, Leonard N. Stern School of Business, Department of Economics.
  30. Benjamin Moll, 2014. "Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation?," American Economic Review, American Economic Association, vol. 104(10), pages 3186-3221, October.
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