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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

    as
    1. Paul Piveteau, 2021. "An Empirical Dynamic Model of Trade with Consumer Accumulation," American Economic Journal: Microeconomics, American Economic Association, vol. 13(4), pages 23-63, November.
    2. Eaton, Jonathan & Eslava, Marcela & Jinkins, David & Krizan, C.J. & Tybout, James, 2025. "A search and learning model of export dynamics," Journal of International Economics, Elsevier, vol. 157(C).
    3. Pol Antràs, 2015. "Global Production: Firms, Contracts, and Trade Structure," Economics Books, Princeton University Press, edition 1, number 10613, December.
    4. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
    Full references (including those not matched with items on IDEAS)

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