Bank Linkages and International Trade

42 Pages Posted: 15 Dec 2013

See all articles by Galina Hale

Galina Hale

University of California, Santa Cruz

Christopher Candelaria

Vanderbilt University

Julián Caballero

Inter-American Development Bank (IDB) - Research Department

Sergey Borisov

YP Holdings LLC

Date Written: December 2013

Abstract

This paper shows that bank linkages have a positive effect on international trade. A global banking network (GBN) is constructed at the bank level, using individual syndicated loan data from Loan Analytics for 1990-2007. Network distance between bank pairs is computed and aggregated to country pairs as a measure of bank linkages between countries. Data on bilateral trade from IMF DOTS are used as the subject of the analysis and data on bilateral bank lending from BIS locational data are used to control for financial integration and financial flows. Using a gravity approach to modeling trade with country-pair and year fixed effects, the paper finds that new connections between banks in a given country-pair lead to an increase in trade flow in the following year, even after controlling for the stock and flow of bank lending between the two countries. It is conjectured that the mechanism for this effect is that bank linkages reduce export risk, and four sets of results that support this conjecture are presented.

JEL Classification: F10, F15, F34, F36

Suggested Citation

Hale, Galina and Candelaria, Christopher and Caballero, Julian and Borisov, Sergey, Bank Linkages and International Trade (December 2013). IDB Working Paper No. IDB-WP-445, Available at SSRN: https://ssrn.com/abstract=2367699 or http://dx.doi.org/10.2139/ssrn.2367699

Galina Hale (Contact Author)

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Christopher Candelaria

Vanderbilt University ( email )

United States

Julian Caballero

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Sergey Borisov

YP Holdings LLC

United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
127
Abstract Views
1,318
Rank
400,439
PlumX Metrics