The Impact of Credit Constraints on Exporting Firms: Evidence from the Provision and Subsequent Removal of Subsidised Credit

21 Pages Posted: 7 Dec 2017

See all articles by Mudit Kapoor

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: December 2017

Abstract

We study the causal impact of credit constraints on exporters using a natural experiment provided by two policy changes in India, first in 1998 which made small‐scale firms eligible for subsidised 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 in each case, we find that credit expansion increased the growth rate of bank borrowing and had a positive effect on exports. The subsequent policy reversal in 2000 had no impact on the growth rate of bank borrowing or on exports.

Keywords: finance, credit constraints, trade, export probability

Suggested Citation

Kapoor, Mudit and Ranjan, Priya and Raychaudhuri, Jibonayan, The Impact of Credit Constraints on Exporting Firms: Evidence from the Provision and Subsequent Removal of Subsidised Credit (December 2017). The World Economy, Vol. 40, Issue 12, pp. 2854-2874, 2017. Available at SSRN: https://ssrn.com/abstract=3083237 or http://dx.doi.org/10.1111/twec.12498

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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