Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
44 Pages Posted: 10 Nov 2009 Last revised: 19 Feb 2011
There are 2 versions of this paper
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
Date Written: December 15, 2009
Abstract
We study the collapse of international trade flows during the global financial crisis using detailed data on monthly US imports. We show that credit conditions were an important channel through which the crisis affected trade volumes, by exploiting the variation in the cost of capital across countries and over time, as well as the variation in financial vulnerability across sectors. Countries with higher interbank rates and thus tighter credit markets exported less to the US during the peak of the crisis. This effect was especially pronounced in sectors that require extensive external financing, have limited access to trade credit, or have few collateralizable assets. Exports of financially vulnerable industries were thus more sensitive to the cost of external capital than exports of less vulnerable industries, and this sensitivity rose during the financial crisis. The quantitative implications of our estimates for trade volumes highlight the large real effects of financial crises and the potential gains from policy intervention.
Keywords: international trade, financial crisis, credit constraints, trade finance, trade credit
JEL Classification: F10, F14, F42, G01, G20, G28
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
The Collapse of International Trade During the 2008-2009 Crisis: In Search of the Smoking Gun
By Andrei A. Levchenko, Logan T. Lewis, ...
-
By Mary Amiti and David E. Weinstein
-
By Mary Amiti and David E. Weinstein
-
Off the Cliff and Back? Credit Conditions and International Trade During the Global Financial Crisis
By Davin Chor and Kalina Manova
-
Trade and the Global Recession
By Jonathan Eaton, Samuel S. Kortum, ...
-
Trade and the Global Recession
By Jonathan Eaton, Samuel S. Kortum, ...
-
Banking Crises and Exports: Lessons from the Past
By Leo Iacovone and Veronika Zavacka