Financial Development and International Trade

Fernando Leibovici

No 2018-015, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with input-output linkages and heterogeneous firms subject to financial frictions. Industries differ in capital-intensity, which leads to differences in external finance dependence. The model is parameterized to match key features of firm-level data. Financial development leads to substantial reallocation of international trade shares from labor- to capital-intensive industries, with minor effects at the aggregate-level. These findings are consistent with estimates from cross-country industry-level and aggregate data.

Keywords: international trade; credit constraints; financial frictions; reallocation; welfare (search for similar items in EconPapers)
JEL-codes: F1 F4 O1 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2018-08-01, Revised 2021-02
New Economics Papers: this item is included in nep-dge and nep-int
Note: Publisher DOI: https://doi.org/10.1086/716564
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in Journal of Political Economy

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Related works:
Journal Article: Financial Development and International Trade (2021)
Working Paper: Financial Development and International Trade (2015)
Working Paper: Financial Development and International Trade (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2018-015

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DOI: 10.20955/wp.2018.015

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