The perils of crossing borders: The financial constraints of Brazilian exporters during the 2009 Global Trade Collapse

Stella Mendes Carneiro () and Marcio Nakane

No 2020_01, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper explores the 2008–2009 Global Trade Collapse to estimate the effects of a credit supply shock on exporters’ investment decisions. Using a Brazilian firm-level dataset compiled by the Brazilian Internal Revenue Service (IRS) over the 2007–2013 period, we pair export-intensive firms with their domestically oriented counterparts. We subsequently calculate the differences in terms of the sensitivity of investment to cash flow between these two groups over the years. After controlling for the effect of international falling demand, our study reveals that exporters are more severely constrained than their peers in the control group only in 2009, when the supply of credit instruments to finance international trade decreased. Given their high need for external financing to support exporting activities and the volatility of the cost of trade finance, which is usually priced against the 3-month LIBOR, our results are in line with our expectations. A number of robustness and placebo tests confirm the validity of the findings.

Keywords: credit constraints; international trade collapse; investment decisions (search for similar items in EconPapers)
JEL-codes: E22 E51 G32 (search for similar items in EconPapers)
Date: 2020-01-15
New Economics Papers: this item is included in nep-cfn, nep-int and nep-mac
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