Finance and International Trade: A Review of the Literature

Anne-Gaël Vaubourg

Revue d'économie politique, 2016, vol. 126, issue 1, 57-87

Abstract: The aim of this paper is to review the literature on the links between finance and international trade. First, sectors? or firms? external financial dependence appears to be a key determinant of export performance. More vulnerable firms or sectors export less than others. Moreover, insufficient financial development and financial crises harm exports to a greater extent when firms or sectors rely on external finance. Second, trade finance, such as letters of credit or trade insurance, plays a key role in financing trade and provides a powerful transmission channel for financial shocks and banking crisis. Finally, we emphasize the complexity of the relationship between finance and trade. On the one hand, finance is also driven by trade patterns such that the causality between both phenomena is bidirectional. On the other hand, there exist institutional interactions between financial and trade reforms.

Keywords: international trade; financial constraint; financial development; financial crisis; trade finance; institutional complementarity and substitutability (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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