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Exploring the nexus between bank market power and exports

Tamilyam Memanova and Nikolaos Mylonidis ()

Economic Modelling, 2020, vol. 84, issue C, 222-233

Abstract: Although the literature underlines the importance of finance in international trade, no prior study has examined the causal links between market power in banking and export performance. Using a world sample over the 1997-2010 period, and accounting for both observed and unobserved country heterogeneity, we find a positive effect of bank market power on exports, especially in high-income countries. We also document that this export-enhancing effect is more potent in informationally opaque markets. Our findings accord with information hypothesis which suggests that market power in banking induces stronger bank-firm relationships which can generate benefits for both borrowers and lenders. Policy interventions should, therefore, promote the supply of relationship lending as a means to mitigate informational asymmetries in the export market.

Keywords: Exports; Bank market power; Information asymmetries; World sample (search for similar items in EconPapers)
JEL-codes: D40 F14 G21 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econmod.2019.04.012

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