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

Author

Listed:
  • Veronica Rappoport

    (Columbia GSB)

  • Philipp Schnabl

    (NYU Stern)

  • Daniel Wolfenzon

    (Columbia GSB)

  • Daniel Paravisini

    (Columbia GSB)

Abstract

In this paper we estimate the elasticity of exports to credit shocks. As a source of variation, we exploit the disproportionate reduction in credit supply by banks with high share of foreign liabilities during the 2008 financial crisis. Using matched customs and firm-level bank credit data from Peru, we compare changes in exports of the same product and to the same destination by firms borrowing from different banks, which allows us to account for variation in non-credit determinants of exports. On the intensive margin, the elasticity of exports to credit is 0.23, and it is relatively constant across firms of different size, industry, and other observable characteristics. We find that both the frequency and average size of shipments are sensitive to credit shocks. On the extensive margin, the elasticity of the number of firms that continue supplying a product-destination export market is 0.36, but credit has no effect on the number of entrants. The estimated elasticities imply that the negative credit supply shock accounts for 15% of the drop in Peruvian exports during the financial crisis.

Suggested Citation

  • Veronica Rappoport & Philipp Schnabl & Daniel Wolfenzon & Daniel Paravisini, 2011. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data," 2011 Meeting Papers 180, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:180
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    References listed on IDEAS

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    1. Andrés Erosa & Tatyana Koreshkova & Diego Restuccia, 2010. "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality," Review of Economic Studies, Oxford University Press, pages 1421-1449.
    2. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    3. Jonathan Goyette & Giovanni Gallipoli, 2012. "Distortions, Efficiency and the Size Distribution of Firms," Cahiers de recherche 12-06, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
    4. Alessio Moro, 2012. "The Structural Transformation Between Manufacturing and Services and the Decline in the US GDP Volatility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(3), pages 402-415, July.
    5. Goyette, Jonathan & Gallipoli, Giovanni, 2015. "Distortions, efficiency and the size distribution of firms," Journal of Macroeconomics, Elsevier, pages 202-221.
    6. Bulent Unel, 2003. "Productivity Trends in India's Manufacturing Sectors in the Last Two Decades," IMF Working Papers 03/22, International Monetary Fund.
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    More about this item

    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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