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The perils of crossing borders: The financial constraints of Brazilian exporters during the 2009 Global Trade Collapse

Author

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  • Stella Mendes Carneiro
  • Marcio Issao Nakane

Abstract

This paper explores the 2008–2009 Global Trade Collapse to estimate the effects of a credit supply shock on exporters’ investment decisions. Using a Brazilian firm-level dataset compiled by the Brazilian Internal Revenue Service (IRS) over the 2007–2013 period, we pair export-intensive firms with their domestically oriented counterparts. We subsequently calculate the differences in terms of the sensitivity of investment to cash flow between these two groups over the years. After controlling for the effect of international falling demand, our study reveals that exporters are more severely constrained than their peers in the control group only in 2009, when the supply of credit instruments to finance international trade decreased. Given their high need for external financing to support exporting activities and the volatility of the cost of trade finance, which is usually priced against the 3-month LIBOR, our results are in line with our expectations. A number of robustness and placebo tests confirm the validity of the findings.

Suggested Citation

  • Stella Mendes Carneiro & Marcio Issao Nakane, 2020. "The perils of crossing borders: The financial constraints of Brazilian exporters during the 2009 Global Trade Collapse," Working Papers, Department of Economics 2020_01, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2020wpecon1
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    File URL: http://www.repec.eae.fea.usp.br/documentos/Carneiro_Nakane_01WP.pdf
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    More about this item

    Keywords

    credit constraints; international trade collapse; investment decisions;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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