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
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Volatility and Growth: Credit Constraints and Productivity-Enhancing Investment
TL;DR: In this article, the authors examine how credit constraints affect the cyclical behavior of productivity-enhancing investment and thereby volatility and growth, and find that tight credit leads to both higher aggregate volatility and lower mean growth for a given total investment rate.
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Finance and trade: A cross-country empirical analysis on the impact of financial development and asset tangibility on international trade
TL;DR: This paper investigated the interplay between financial development, asset tangibility, and international trade and found that economies with higher levels of financial development have higher export shares and trade balance in industries with more intangible assets.
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Comparative advantage, demand for external finance, and financial development
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TL;DR: This article showed that financial development is an equilibrium outcome that depends strongly on a country's trade pattern and that financial systems are more developed in countries with large financially intensive sectors, while financial development in countries that primarily export goods which do not rely on external finance is lower.
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Credit market imperfections and patterns of international trade and capital flows
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Do Sunk Costs of Exporting Matter for Net Export Dynamics
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