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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 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.

Date: 2018-08-01
New Economics Papers: this item is included in nep-dge and nep-int
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Related works:
Working Paper: Financial Development and International Trade (2015) Downloads
Working Paper: Financial Development and International Trade (2013)
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DOI: 10.20955/wp.2018.015

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