The Impact of Credit Constraints on Exporting Firms: Empirical Evidence from India
32 Pages Posted: 16 Mar 2012
Date Written: March 14, 2012
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: Suggested Citation