Do Community Banks Contribute to International Trade? Evidence from U.S. Data

Posted: 3 Oct 2016 Last revised: 2 Aug 2018

See all articles by Dmytro Holod

Dmytro Holod

SUNY at Stony Brook University - College of Business

Gokhan Torna

SUNY at Stony Brook University - College of Business

Date Written: July 23, 2018

Abstract

Although bank letters of credit are considered the lifeblood of international commerce, there is little empirical evidence on their role in intermediating international trade transactions in the U.S. In this paper, we investigate if and to what extent commercial letters of credit (CLCs) provided by small, community banks contribute to the state-level volume of international trade. The results show that aggregate CLCs issued by small U.S. banks have an economically and statistically significant explanatory power in describing state-level international trade. The relationship between the volumes of small bank commercial letters of credit and international trade is mostly driven by imports. Community banks’ contribution to state-level international trade is particularly evident in states with a high concentration of small manufacturing firms, which are known to be heavily dependent on community banks for financing.

Keywords: Community Banks, Letters of Credit, International Trade, Export, Import, SMEs

Suggested Citation

Holod, Dmytro and Torna, Gokhan, Do Community Banks Contribute to International Trade? Evidence from U.S. Data (July 23, 2018). Journal of International Financial Markets, Institutions and Money, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2846412 or http://dx.doi.org/10.2139/ssrn.2846412

Dmytro Holod

SUNY at Stony Brook University - College of Business ( email )

321 Harriman Hall
Stony Brook, NY 11794-3775
United States
631-632-7183 (Phone)
631-632-9412 (Fax)

HOME PAGE: http://ms.cc.sunysb.edu/~dholod/

Gokhan Torna (Contact Author)

SUNY at Stony Brook University - College of Business ( email )

250 Harriman Hall
Stony Brook, NY 11777
United States
631-632-5304 (Phone)
631-632-9412 (Fax)

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