Bank Linkages and International Trade

Galina Hale, Christopher Candelaria, Julian Caballero and Sergey Borisov

No IDB-WP-445, Research Department Publications from Inter-American Development Bank, Research Department

Abstract: This paper shows that bank linkages have a positive effect on international trade. A global banking network (GBN) is constructed at the bank level, using individual syndicated loan data from Loan Analytics for 1990-2007. Network distance between bank pairs is computed and aggregated to country pairs as a measure of bank linkages between countries. Data on bilateral trade from IMF DOTS are used as the subject of the analysis and data on bilateral bank lending from BIS locational data are used to control for financial integration and financial flows. Using a gravity approach to modeling trade with country-pair and year fixed effects, the paper finds that new connections between banks in a given country-pair lead to an increase in trade flow in the following year, even after controlling for the stock and flow of bank lending between the two countries. It is conjectured that the mechanism for this effect is that bank linkages reduce export risk, and four sets of results that support this conjecture are presented.

JEL-codes: F10 F15 F34 F36 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-ban and nep-int
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Citations: View citations in EconPapers (17)

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Related works:
Journal Article: Bank linkages and international trade (2018)
Working Paper: Bank Linkages and International Trade (2013)
Working Paper: Bank Linkages and International Trade (2013)
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