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Financial Vulnerability and Export Dynamics

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

No 948, Working Papers from Economic Research Forum

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 have little access to more 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 in the literature 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 an initially more open capital account, suggesting that portfolio inflows are good substitutes for underdeveloped domestic financial markets.

New Economics Papers: this item is included in nep-int
Date: 2015-09, Revised 2015-09
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Published by The Economic Research Forum (ERF)

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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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