Political risk and export promotion: evidence from Germany
Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that German public export credit guarantees (Hermes guarantees) mitigate this friction to trade flows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees. The idea behind export promotion through public export credit agencies (ECAs) is that the private market is unable to provide adequate insurance for all risks associated with exports. As a consequence, firms' export activities are limited in the absence of insurance provision. Using a novel data set on guarantees we estimate the effect of guarantees in a static and dynamic panel model. We find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective. Furthermore, political risk turns out to be a robust determinant of exports and hence should be taken into account in any empirical model of trade.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: Postfach 10 06 02, 60006 Frankfurt|
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Web page: http://www.bundesbank.de/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Richard Portes & Helene Rey, 2000.
"The determinants of cross-border equity flows,"
LSE Research Online Documents on Economics
20203, London School of Economics and Political Science, LSE Library.
- R Portes & H Rey, 2000. "The Determinants Of Cross-Border Equity Flows," CEP Discussion Papers dp0446, Centre for Economic Performance, LSE.
- Richard Portes & Helene Rey, 1999. "The Determinants of Cross-Border Equity Flows," NBER Working Papers 7336, National Bureau of Economic Research, Inc.
- Portes, Richard & Rey, Hélène, 1999. "The Determinants of Cross-Border Equity Flows," CEPR Discussion Papers 2225, C.E.P.R. Discussion Papers.
- Richard Portes, 2005. "The Determinants of Cross-Border Equity Flows," Post-Print halshs-00754100, HAL.
- Richard Portes & Hélène Rey, 2001. "The Determinants of Cross-Border Equity Flows," DELTA Working Papers 2001-08, DELTA (Ecole normale supérieure).
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- Elhanan Helpman, 1998.
"The Structure of Foreign Trade,"
NBER Working Papers
6752, National Bureau of Economic Research, Inc.
- Helpman, Elhanan, 1998. "The Structure of Foreign Trade," CEPR Discussion Papers 2020, C.E.P.R. Discussion Papers.
- Elhanan Helpman, 1998. "The Structure of Foreign Trade," Harvard Institute of Economic Research Working Papers 1848, Harvard - Institute of Economic Research.
- Helpman, E., 1998. "The Structure of Foreign Trade," Papers 18-98, Tel Aviv.
- Alsem, K.J., 2003. "Insurability of export credit risks," Research Report 03F07, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
- Andrew K. Rose, 2002.
"Do We Really KNow that the WTO Increases Trade?,"
182002, Hong Kong Institute for Monetary Research.
- Andrew K. Rose, 2005.
"The Foreign Service and Foreign Trade: Embassies as Export Promotion,"
NBER Working Papers
11111, National Bureau of Economic Research, Inc.
- Andrew K. Rose, 2007. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," The World Economy, Wiley Blackwell, vol. 30(1), pages 22-38, 01.
- Rose, Andrew K, 2005. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," CEPR Discussion Papers 4953, C.E.P.R. Discussion Papers.
- Andrew B. Bernard & J. Bradford Jensen, 2004.
"Why Some Firms Export,"
The Review of Economics and Statistics,
MIT Press, vol. 86(2), pages 561-569, May.
- Filip Abraham & Gerda Dewit, 2000. "Export Promotion Via Official Export Insurance," Open Economies Review, Springer, vol. 11(1), pages 5-26, January.
- Funatsu, Hideki, 1986. "Export Credit Insurance and Moral Hazard," 商学討究 (Shogaku Tokyu), Otaru University of Commerce, vol. 36(3), pages 217-235.
- Rienstra-Munnicha, Paul & Turvey, Calum G., 2002.
"The Relationship Between Exports, Credit Risk And Credit Guarantees,"
2002 Annual meeting, July 28-31, Long Beach, CA
19583, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Paul Rienstra-Munnicha & Calum G. Turvey, 2002. "The Relationship between Exports, Credit Risk and Credit Guarantees," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 50(3), pages 281-296, November.
- Rienstra-Munnicha, Paul & Turvey, Calum G., 2002. "The Relationship Between Exports, Credit Risk And Credit Guarantees," Working Papers 34115, University of Guelph, Department of Food, Agricultural and Resource Economics.
- Andrew Bernard & Joachim Wagner, 2001.
"Export entry and exit by German firms,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 137(1), pages 105-123, March.
- repec:dgr:rugsom:03f07 is not listed on IDEAS
- Salvador Gil & Rafael Llorca & José A. Martínez Serrano, 2008. "Measuring the impact of regional export promotion: The Spanish case," Papers in Regional Science, Wiley Blackwell, vol. 87(1), pages 139-146, 03.
- Pierre-Guillaume Méon & Khalid Sekkat, 2004.
"Does the Quality of Institutions Limit the MENA's Integration in the World Economy?,"
The World Economy,
Wiley Blackwell, vol. 27(9), pages 1475-1498, 09.
- Pierre-Guillaume Méon & Khalid Sekkat, 2004. "Does the quality of institutions limit the MENA's integration in the world economy?," ULB Institutional Repository 2013/164576, ULB -- Universite Libre de Bruxelles.
- Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, March.
- Dixit, Avinash K, 1989.
"Entry and Exit Decisions under Uncertainty,"
Journal of Political Economy,
University of Chicago Press, vol. 97(3), pages 620-38, June.
- Dewit, Gerda, 2001. "Intervention in risky export markets: insurance, strategic action or aid?," European Journal of Political Economy, Elsevier, vol. 17(3), pages 575-592, September.
When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:5110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.