The role of foreign banks in trade

Stijn Claessens (), Omar Hassib () and Neeltje Van Horen ()
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Omar Hassib: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 656, Bank of England working papers from Bank of England

Abstract: This paper provides new insights into how financial globalization relates to international trade. Exploiting unique, time-varying, bilateral data on foreign bank ownership for many countries, we show that, for emerging markets, greater local foreign bank presence, especially from the importing country, is associated with higher exports in sectors more dependent on external finance. The association does not arise for advanced countries and is stronger when institutions are weaker. The presence of a bank from the importing country is also associated with higher exports in sectors with more opaque products. Results are robust to controlling for domestic financial development and a full set of fixed effects. An event study confirms findings and shows impacts to be more pronounced when a foreign bank enters through an M&A. Imports also increase after entry, but less so. Overall, results suggest that foreign banks facilitate trade in emerging markets by increasing the availability of external finance and helping overcome information asymmetries.

Keywords: Foreign banks; international trade; credit constraints; financial development (search for similar items in EconPapers)
JEL-codes: F14 F15 F21 F36 G21 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2017-04-10
New Economics Papers: this item is included in nep-ban and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: The Role of Foreign Banks in Trade (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0656

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