 Navigating trade uncertainty: The role of trade financing and the spillover effectsMauricio Calani, Paula Margaretic and David Moreno Journal of International Economics, 2025, vol. 153, issue C Abstract: This paper exploits the exogenous changes of destination/origin-specific trade uncertainty (TU) to investigate the direct and spillover effects of TU on firms’ foreign-trade operations and credit outcomes. Using transaction-level data of Chilean firms and banks, we first show that increasing TU dampens export growth through a deterioration of firms’ working capital. This is especially true when exports are mainly financed by cash-in-advance, a payment mode that entails shorter and less permanent relationships between firms. Second, we find that increases in TU induce a bank-firm portfolio redistribution away from small firms toward large importers and firms involved in the global value chain (GVC). Our results are consistent with a risk-mitigating channel from banks that grant larger loans to firms that are perceived as relatively less risky during periods of high trade tensions. This way, TU shocks spill over to other firms not initially affected by TU through the bank credit market. Keywords: Trade uncertainty; Domestic credit provision; Trade finance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:153:y:2025:i:c:s0022199624001703 DOI: 10.1016/j.jinteco.2024.104043 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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