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Testing the trade credit and trade link: Evidence from data on export credit insurance

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  • Auboin, Marc
  • Engemann, Martina

Abstract

Trade finance has received special attention during the financial crisis as one of the potential culprits for the great trade collapse. Several researchers have used micro level data to establish the link between trade finance and trade, especially so during the financial crisis, and have found diverting results. This paper analyses the effect of trade credit on trade on a macro level through a whole cycle. We employ Berne Union data on export credit insurance, the most extensive dataset on trade credits available at the moment, for the period of 2005-2011. Using an instrumentation strategy we can identify a significantly positive effect of insured trade credit, as a proxy for trade credits, on trade. The effect of insured trade credit on trade is very strong and remains stable over the cycle, not varying between crisis and non-crisis periods.

Suggested Citation

  • Auboin, Marc & Engemann, Martina, 2012. "Testing the trade credit and trade link: Evidence from data on export credit insurance," WTO Staff Working Papers ERSD-2012-18, World Trade Organization (WTO), Economic Research and Statistics Division.
  • Handle: RePEc:zbw:wtowps:ersd201218
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    References listed on IDEAS

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    Cited by:

    1. Flores Zendejas, Juan, 2015. "Capital Markets and Sovereign Defaults: A Historical Perspective," Working Papers unige:73325, University of Geneva, Paul Bairoch Institute of Economic History.
    2. Iwan J. Azis & Hyun S. Shin (ed.), 2014. "Global Shock, Risks, and Asian Financial Reform," Books, Edward Elgar Publishing, number 15939.

    More about this item

    Keywords

    trade credit; financial crisis; import estimation;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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