IDEAS home Printed from https://ideas.repec.org/p/red/sed013/532.html

Financial Development and International Trade

Author

Listed:
  • Fernando Leibovici

    (New York University and York University)

Abstract

This paper studies the extent to which frictions in financial markets affect aggregate trade flows. I study a model of firm dynamics with financial frictions and international trade, calibrated to match key features of firm-level data. I find that, while financial frictions have a large effect on the pattern and extent of international trade at the industry-level, as documented in the literature, they have a small effect on trade at the aggregate-level. Relaxing the financial constraints allows more firms to finance the upfront export entry costs, with a significant impact on industry-level trade flows to the extent that the industry is small enough to affect equilibrium prices. In contrast, removing the financial constraints at the aggregate-level leads to an increase in the wage and interest rate, thereby reducing the returns to becoming an exporter, with a small impact on aggregate trade flows. I also find that the cross-industry response of international trade to financial development is quantitatively consistent with industry-level evidence on the extent of trade across countries, and that the effectiveness of policies aimed at increasing trade by easing the access to credit for exporters is limited if implemented at an economy-wide scale.

Suggested Citation

  • Fernando Leibovici, 2013. "Financial Development and International Trade," 2013 Meeting Papers 532, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:532
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed013:532. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.