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International Trade Finance and Exports: Evidence from Korean Bank-Intermediated Trade Finance Instruments

Sangyeon Hwang and Hyejoon Im ()
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Hyejoon Im: Yeungnam University

Open Economies Review, 2017, vol. 28, issue 2, 319-346

Abstract: Abstract This paper investigates the effects of trade finance shocks on real exports by using novel data on two bank-intermediated instruments of trade finance in Korea: foreign trade loans extended by commercial banks and documentary bills purchased by them. Using a vector autoregression (VAR) model, the results show that a negative shock to both instruments adversely affects exports, particularly the exports of small and medium-sized enterprises (SMEs). The trade financing condition explains as much as 10–14 % of the variation in exports, which is comparable to the estimates in previous studies. Noteworthy is that the effects of trade finance on SME exports vary upon whether it is pre- or post-shipment financing.

Keywords: Trade finance; Exports; Loan; Documentary bill; SMEs; Financial crisis (search for similar items in EconPapers)
JEL-codes: F14 F19 G21 (search for similar items in EconPapers)
Date: 2017
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