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Financial Vulnerability and Export Dynamics

Mélise Jaud (), Youssouf Kiendrebeogo () and Marie-Ange Véganzonès

No 201526, Working Papers from CERDI

Abstract: This study documents the implications of financial vulnerability for export diversification in developing economies. Financial crises, by increasing the incidence of sunk costs of entry into exporting, reduce firm export dynamics. Financially-vulnerable exporters are not able to fully realize economies of scale in production and access better-sophisticated technologies. The number of products and destinations per exporter are therefore likely to decrease in times of crisis. We use a comprehensive cross-country dataset on export dynamics, with data covering the 1997-2011 period for 34 developing countries to investigate this issue. Building on the generalized difference-in-differences procedure proposed by Rajan & Zingales (1998) to remove any endogeneity bias, the results point to a negative and economically large effect of financial vulnerability on export diversification. Financial crises reduce export dynamics disproportionately more in financially dependent industries. This effect is less pronounced in countries with initially more open capital account, suggesting that portfolio inflows are good substitutes for underdeveloped domestic financial markets.

Keywords: Financial crises; Financial vulnerability; Export dynamics (search for similar items in EconPapers)
JEL-codes: O16 G01 F14 F12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2015-10
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Published in The World Economy, 2017, pages
Published in The World Economy

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http://publi.cerdi.org/ed/2015/2015.26.pdf (application/pdf)

Related works:
Journal Article: Financial vulnerability and export dynamics (2018) Downloads
Working Paper: Financial vulnerability and export dynamics (2017)
Working Paper: Financial Vulnerability and Export Dynamics (2015) Downloads
Working Paper: FINANCIAL VULNERABILITY AND EXPORT DYNAMICS (2015) Downloads
Working Paper: Financial Vulnerability and Export Dynamics (2015) Downloads
Working Paper: Financial Vulnerability and Export Dynamics (2005) Downloads
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