No guarantees, no trade: How banks affect export patterns

Friederike Niepmann and Tim Schmidt-Eisenlohr

Journal of International Economics, 2017, vol. 108, issue C, 338-350

Abstract: Employing new data on U.S. banks' trade-finance claims by country, this paper estimates the effect of letter-of-credit supply shocks on U.S. exports. We show that a one-standard deviation negative shock to a country's letter-of-credit supply reduces U.S. exports to that country by 1.5 percentage points. This effect is driven by countries that are small and where few banks are active. It more than doubles during the 2007-09 crisis. The provision of letters of credit is highly concentrated and banks are geographically specialized. Therefore, shocks to individual banks can have sizable effects in the aggregate and affect trade patterns.

Keywords: Trade finance; Global banks; Letter of credit; Exports; Financial shocks (search for similar items in EconPapers)
JEL-codes: F21 F23 F34 G21 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (30)

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Related works:
Working Paper: No Guarantees, No Trade: How Banks Affect Export Patterns (2016)
Working Paper: No Guarantees, No Trade: How Banks Affect Export Patterns (2015)
Working Paper: No Guarantees, No Trade: How Banks Affect Export Patterns (2014)
Working Paper: No guarantees, no trade: how banks affect export patterns (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:c:p:338-350

DOI: 10.1016/j.jinteco.2017.07.007

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