How Local Financial Market Conditions, Interest Rates, and Productivity Relate to Decisions to Export

Dingming Liu (), Pu Chen () and Chunyang Wang ()
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Pu Chen: School of Economics, Renmin University of China
Chunyang Wang: HSBC Business School, Peking University

Annals of Economics and Finance, 2015, vol. 16, issue 2, 315-334

Abstract: Theoretic and empirical studies argue that the differences in financial mar- ket development contribute to varying export levels in international trade. We illustrate this idea by studying a heterogeneous firm model expanded to in- clude a borrowing constraint, and we find that in a developed financial system a change in interest rate exerts a significant effect on exports, due to the high dependence on external financing. Conversely, in less developed financial sys- tems, where producers typically have to rely on internally generated capital, changes in the interest rate do not generate a significant effect on export levels.

Keywords: Exporters; Interest rate; Trade Volume (search for similar items in EconPapers)
JEL-codes: F1 F4 G3 (search for similar items in EconPapers)
Date: 2015
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