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Time to ship during Financial Crisis

Listed author(s):
  • Nicolas Berman

    (Centre d'économie de la Sorbonne)

  • José de Sousa

    (Université Panthéon-Sorbonne - Paris I)

  • Thierry Mayer

    (Département d'économie)

  • Philippe Martin

    (Département d'économie)

We show that the negative impact of financial crises on trade is magnified for destinations with longer time-to-ship. A simple model where exporters react to an increase in the probability of default of importers by increasing their export price and decreasing their export volumes to destinations in crisis is consistent with this empirical finding. For longer shipping time, those effects are indeed magnified as the probability of default increases as time passes. Some exporters also decide to stop exporting to the crisis destination, the more so the longer time-to-ship. Using aggregate data from 1950 to 2009, we found that this magnification effect is robust to alternative specifications, samples and inclusion of additional controls, including distance. The form level predictions are also broadly consistent with French exporter data from 1995 to 2005.

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File URL: http://spire.sciencespo.fr/hdl:/2441/6ggbvnr6munghes9oc1hne632/resources/2013-14.pdf
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Paper provided by Sciences Po Departement of Economics in its series Sciences Po Economics Discussion Papers with number 2013-14.

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Date of creation: Sep 2013
Handle: RePEc:spo:wpecon:info:hdl:2441/6ggbvnr6munghes9oc1hne632
Contact details of provider: Web page: http://econ.sciences-po.fr/
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  1. Michael Waugh & Fernando Leibovici, 2010. "Cyclical Fluctuations in International Trade Volumes," 2010 Meeting Papers 1095, Society for Economic Dynamics.
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