Are Banks Engines of Export? Financial Structures and Export Dynamics

41 Pages Posted: 26 Oct 2018 Last revised: 30 Oct 2018

See all articles by Raoul Minetti

Raoul Minetti

Michigan State University - Department of Economics

Alen Mulabdic

World Bank

Michele Ruta

Economic Research Division, WTO; Columbia Business School - Economics Department; International Monetary Fund (IMF)

Susan Chun Zhu

Michigan State University - Department of Economics

Date Written: October 25, 2018

Abstract

This paper studies the impact of financial structures on the dynamics of the export sector using rich data from over 60 countries. The results reveal that bank-oriented financial systems boost the size of the export sector more than market-oriented financial systems. However, especially in middle- and low-income countries, this effect mostly stems from banks slowing down exporters' exit rather than promoting firms' entry into export. The reduced exit from the export sector appears to reflect domestic banks' tendency to evergreen loans to exporters ("soft budget constraint") more than banks' buffering role in difficult times. Foreign banks mitigate this effect and enhance the dynamism of the export sector.

Suggested Citation

Minetti, Raoul and Mulabdic, Alen and Ruta, Michele and Chun Zhu, Susan, Are Banks Engines of Export? Financial Structures and Export Dynamics (October 25, 2018). World Bank Policy Research Working Paper No. 8621. Available at SSRN: https://ssrn.com/abstract=3273174

Raoul Minetti (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
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517-432-1068 (Fax)

Alen Mulabdic

World Bank ( email )

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Michele Ruta

Economic Research Division, WTO ( email )

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HOME PAGE: http://www.iue.it/Personal/Fellows/MicheleRuta/Welcome.htm

Columbia Business School - Economics Department ( email )

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International Monetary Fund (IMF) ( email )

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Susan Chun Zhu

Michigan State University - Department of Economics ( email )

214 Marshall Hall
East Lansing, MI 48824
United States
517-355-9647 (Phone)
517-432-1068 (Fax)

HOME PAGE: http://www.msu.edu/~ec/faculty/zhu/zhu.html

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