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The Impact of Credit Constraints on Exporting Firms: Empirical Evidence from India

32 Pages Posted: 16 Mar 2012  

Mudit Kapoor

Indian School of Business

Priya Ranjan

University of California, Irvine - Department of Economics

Jibonayan Raychaudhuri

University of East Anglia (UEA) - School of Economic and Social Studies

Date Written: March 14, 2012

Abstract

This paper studies the causal impact of credit constraints on exporting firms. We exploit a natural experiment provided by two policy changes in India, first in 1998 which made small scale firms eligible for subsidized direct credit, and a subsequent reversal in policy in 2000 wherein some of these firms lost their eligibility. Using firms that were not affected by these policy changes as our control group we find that expansion of subsidized credit increased the rate of growth of borrowing and export earnings by 20 percent in each case. Interestingly, the subsequent policy reversal in 2000 had no impact on the rate of growth of total borrowings and the export earnings.

Keywords: Finance, Credit constraints, Trade, Export

JEL Classification: F12, L52

Suggested Citation

Kapoor, Mudit and Ranjan, Priya and Raychaudhuri, Jibonayan, The Impact of Credit Constraints on Exporting Firms: Empirical Evidence from India (March 14, 2012). Available at SSRN: https://ssrn.com/abstract=2023068 or http://dx.doi.org/10.2139/ssrn.2023068

Mudit Kapoor (Contact Author)

Indian School of Business ( email )

Hyderabad, Gachibowli 500 019
India

Priya Ranjan

University of California, Irvine - Department of Economics ( email )

3151 Social Science Plaza
Irvine, CA 92697-5100
United States

Jibonayan Raychaudhuri

University of East Anglia (UEA) - School of Economic and Social Studies ( email )

Norwich, Norfolk NR4 7TJ
United Kingdom

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