No Guarantees, No Trade: How Banks Affect Export Patterns

Friederike Niepmann and Tim Schmidt-Eisenlohr

No 1158, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: How relevant are financial instruments to manage risk in international trade for exporting? Employing a unique dataset of U.S. banks' trade finance claims by country, this paper estimates the effect of shocks to the supply of letters of credit on U.S. exports. We show that a one-standard deviation negative shock to a country's supply of letters of credit reduces U.S. exports to that country by 1.5 percentage points. This effect is stronger for smaller and poorer destinations. It more than doubles during crisis times, suggesting a non-negligible role for finance in explaining the Great Trade Collapse.

Keywords: trade finance; global banks; letters of credit; exports; financial shocks (search for similar items in EconPapers)
JEL-codes: F21 F23 F34 G21 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2016-02-10
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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http://www.federalreserve.gov/econresdata/ifdp/2016/files/ifdp1158.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/IFDP.2016.1158 DOI (application/pdf)

Related works:
Journal Article: No guarantees, no trade: How banks affect export patterns (2017)
Working Paper: No Guarantees, No Trade: How Banks Affect Export Patterns (2015)
Working Paper: No Guarantees, No Trade: How Banks Affect Export Patterns (2014)
Working Paper: No guarantees, no trade: how banks affect export patterns (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1158

DOI: 10.17016/IFDP.2016.1158

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