Research Archive

Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data

Publication type: Forthcoming article

Research Archive Topic: Business Economics and Public Policy, Corporate Finance, World Business

Abstract

We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital-flow reversals during the 2008 financial crisis. We find that credit shocks affect the intensive margin of exports, but have no significant impact on entry or exit of firms to new product and destination markets. Our results suggest that credit shortages reduce exports through raising the variable cost of production, rather than the cost of financing sunk entry investments.
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Citation

Paravisini, Daniel, Veronica Rappoport, Philipp Schnabl, and Daniel Wolfenzon. "Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data." Review of Economic Studies (forthcoming).


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