Financial choice and international trade
Katheryn N. Russ and
Diego Valderrama ()
Journal of Economic Behavior & Organization, 2019, vol. 157, issue C, 297-319
Motivated by existing and new stylized facts, we join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, gains from trade, and the real exchange rate in a small open economy. Increasing bank efficiency and reducing bond transaction costs have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate. Increasing access to export markets generates a financial switching channel for gains from trade, allowing firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital.
Keywords: Financial choice; Heterogeneous firms; Margins of trade; Corporate debt; Trade liberalization; Financial development (search for similar items in EconPapers)
JEL-codes: F12 F4 F65 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:157:y:2019:i:c:p:297-319
Access Statistics for this article
Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.
More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().