Political Risk and Export Promotion: Evidence from Germany

23 Pages Posted: 23 May 2008

See all articles by Christoph Moser

Christoph Moser

Johannes Gutenberg University Mainz - Faculty of Law and Economics

Thorsten Nestmann

University of Mainz - Department of Economics

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision

Multiple version iconThere are 3 versions of this paper

Abstract

Political risk represents an important hidden transaction cost that reduces international trade. This paper investigates the claim that public export credit guarantees mitigate this friction to trade flows and hence promote exports. We employ an empirical trade gravity model, where we explicitly control for political risk in the importing country in order to evaluate the effect of export guarantees. Using a novel data set on guarantees, we estimate the effect of guarantees in a static and dynamic panel model. We find a statistically and economically significant positive effect of public export guarantees on exports which indicates that export promotion is indeed effective. Furthermore, political risk turns out to be an important obstacle for exports and hence should be taken into account in any empirical model of trade.

Suggested Citation

Moser, Christoph and Nestmann, Thorsten and Wedow, Michael, Political Risk and Export Promotion: Evidence from Germany. World Economy, Vol. 31, Issue 6, pp. 781-803, June 2008, Available at SSRN: https://ssrn.com/abstract=1136500 or http://dx.doi.org/10.1111/j.1467-9701.2008.01102.x

Christoph Moser (Contact Author)

Johannes Gutenberg University Mainz - Faculty of Law and Economics ( email )

Chair of Corporate Finance
D-55099 Mainz, 55128
Germany

Thorsten Nestmann

University of Mainz - Department of Economics ( email )

Chair of Corporate Finance
D-55099 Mainz, 55128
Germany

Michael Wedow

European Central Bank (ECB) - Directorate Financial Stability and Supervision ( email )

Frankfurt a.M.
Germany

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
5
Abstract Views
1,469
PlumX Metrics