How Trade Credits Foster International Trade

Monika Schnitzer (), Katharina Eck and Martina Engemann

No 8954, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Internationally active firms rely intensively on trade credits even though they are considered particularly expensive. This phenomenon has been little explored so far. Our theoretical analysis shows that trade credits can alleviate financial constraints arising from asymmetric information because they serve as a quality signal and reduce the uncertainty related to international transactions. We use unique survey data on German enterprises to test the effect of the use of trade credits on firms' exporting and importing behavior, both at the extensive and intensive margins. Our results support the assertion that trade credits have a positive impact on firms' exporting and importing activities.

Keywords: Beeps; Export; Financial constraints; Import; International trade; Trade credits (search for similar items in EconPapers)
JEL-codes: F10 G30 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: How Trade Credits Foster International Trade (2012)
Working Paper: How Trade Credits Foster International Trade (2012)
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