Credit Constraints, Heterogeneous Firms and International Trade
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This article examined the detrimental consequences of financial market imperfections for international trade and developed a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability.Abstract:
This paper examines the detrimental consequences of financial market imperfections for international trade. I develop a heterogeneous-firm model with countries at different levels of financial development and sectors of varying financial vulnerability. Applying this model to aggregate trade data, I study the mechanisms through which credit constraints operate. First, financial development increases countries' exports above and beyond its impact on overall production. Firm selection into exporting accounts for a third of the trade-specific effect, while two thirds are due to reductions in firm-level exports. Second, financially advanced economies export a wider range of products and their exports experience less product turnover. Finally, while all countries service large destinations, exporters with superior financial institutions have more trading partners and also enter smaller markets. All of these effects are magnified in financially vulnerable sectors. These results have important policy implications for less developed economies that rely on exports for economic growth but suffer from poor financial contractibility.read more
Figures
Table 10. Economic Significance: Predicted vs. Actual Trade Growth 
Table 9. Economic Significance: Comparative Statics 
Table 5. Financial Development and Firm-Level Exports 
Figure 3. The Productivity Cut-off for Exporting 
Table 5. Financial Development and Firm-Level Exports 
Table 1. Export Patterns in the Data
Citations
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References
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Optimal Lending Contracts and Firm Dynamics
TL;DR: In this paper, the authors developed a general model of lending in the presence of endogenous borrowing constraints, where the ability to raise short-term capital is limited by some prespecified function of debt.
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The role of extensive and intensive margins and export growth
Tibor Besedes,Thomas J. Prusa +1 more
TL;DR: In this paper, the authors investigate and compare countries' export growth based on their performance at the extensive and intensive export margins, and find that developing countries would experience significantly higher export growth if they were able to improve their performance with respect to the two key components of the intensive margin: survival and deepening.
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Thorsten Beck,Thorsten Beck +1 more
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