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International Trade Finance and Learning Dynamics

Author

Listed:
  • Kohn, David
  • Luttini, Emiliano Evaristo
  • Szkup, Michal
  • Zhang, Shengxing

Abstract

This paper studies how relationship-specific learning affects the joint dynamics of exports and trade finance. Using micro-level Chilean data, it documents that new exporters initially rely on cash-in-advance payments and gradually transition to providing trade credit as relationships mature, with faster transitions in riskier destinations and for less experienced firms. Motivated by this, the paper develops a general equilibrium trade model that integrates learning about foreign demand and counterparty risk together with firms’ endogenous export and trade finance choices. The model is used to investigate the role of learning and risks in shaping export adjustments and quantify the impact of shocks to the cost of trade finance on aggregate exports. The analysis finds that the response to these shocks depends on the riskiness of the destination and is amplified by the disruption of long-term trading relationships.

Suggested Citation

  • Kohn, David & Luttini, Emiliano Evaristo & Szkup, Michal & Zhang, Shengxing, 2026. "International Trade Finance and Learning Dynamics," Policy Research Working Paper Series 11381, The World Bank.
    • Handle: RePEc:wbk:wbrwps:11381
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • 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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