EXIM's Exit: The Real Effects of Trade Financing by Export Credit Agencies

Poorya Kabir, Adrien Matray, Müller, Karsten and Chenzi Xu
Authors registered in the RePEc Author Service: Karsten Müller

No 18795, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the role of export credit agencies — the predominant tool of industrial policy — on firm behavior by using the effective shutdown of the Export–Import Bank of the United States (EXIM) from 2015-2019 as a natural experiment. We show that firms that previously relied on EXIM support saw a 18% drop in global sales after the agency closed down, driven by a reduction in exports. Firms affected by the shutdown were unable to make up for the loss of trade financing, especially if they were financially constrained, and consequently laid off employees and curtailed investment. These negative effects were more pronounced for firms with higher export opportunities and higher ex-ante marginal revenue products of capital. Lower exports at the firm level aggregate up to lower total exports for industries most reliant on EXIM support. These findings suggest that government policies aimed at providing trade financing can boost exports and firm growth even in countries with well-developed financial markets without necessarily leading to a misallocation of resources.

Keywords: Trade finance; Trade policy; Firm-level exports (search for similar items in EconPapers)
JEL-codes: F13 F14 G31 H25 H81 (search for similar items in EconPapers)
Date: 2024-01
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Working Paper: EXIM’s Exit: The Real Effects of Trade Financing by Export Credit Agencies (2024)
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