A heterogeneous-firm model of trade and growth with country-specific credit constraints

Ryoji Ohdoi, Kazuo Mino (mino.kazuo.2u@kyoto-u.ac.jp) and Yunfang Hu (yhu@econ.kobe-u.ac.jp)
Additional contact information
Kazuo Mino: Kyoto University
Yunfang Hu: Kobe University

No 1095, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This study constructs a two-country endogenous growth model with heterogeneous firms and asymmetric countries, where the asymmetry lies in the degree of financial frictions. The tradable intermediate goods sector consists of heterogeneous firms and requires specific goods for entry. These goods are produced by heterogeneous entrepreneurs facing credit constraints due to financial frictions. Using this framework, we derive the following results analytically. First, a permanent credit crunch in one country facilitates the exit of intermediate goods firms in that country; meanwhile, it decreases the profitability of exports of the other country's intermediate goods firms, causing exporters to switch to selling their goods domestically. Second, under no international lending and borrowing, the credit crunch reduces the growth rates of both countries not only in the long run but also during the transition to a new balanced growth path. We also compare the long-run effects under such a financial autarky and financial integration.

Keywords: Endogenous growth; Heterogeneous firms; Asymmetric countries; Financial frictions; Country-specific credit crunch (search for similar items in EconPapers)
JEL-codes: F12 F43 O16 O41 (search for similar items in EconPapers)
Pages: 44pages
Date: 2023-08
New Economics Papers: this item is included in nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.kier.kyoto-u.ac.jp/wp/wp-content/uploads/2023/08/DP1095.pdf (application/pdf)

Related works:
Working Paper: A heterogeneous-firm model of trade and growth with country-specific credit constraints (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kyo:wpaper:1095

Access Statistics for this paper

More papers in KIER Working Papers from Kyoto University, Institute of Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Makoto Watanabe (watanabe.makoto.2d@kyoto-u.ac.jp).