Economics at your fingertips  

Contractual Imperfections and the Impact of Crises on Trade: Evidence from Industry-Level Data

Renzo Castellares () and Jorge Salas ()

No 2016-001, Working Papers from Banco Central de Reserva del Perú

Abstract: We build a simple trade model in which: (i) exporters are paid after delivery of the goods, and (ii) complementarity exists between procyclical contract enforcement at the importing-country level and contractual vulnerability at the industry level. In the model, an adverse aggregate shock in the importing country generates a disproportionate decline in imports in more contractually vulnerable industries. Using disaggregated bilateral trade data for more than 100 countries, we find robust support for the model’s predictions. Our empirical approach exploits the variation in the occurrence of recessions and financial crises across countries from 1989 to 2006, and the variation in contractual dependence across manufacturing industries. The estimated amplification effects of contractual dependence on sectoral imports are statistically significant and economically important. Our analysis uses different industry measures of contractual vulnerability, including measures of product complexity and a novel indicator of uncollectible credit sales.

Keywords: Trade; recessions; financial crises; contract enforcement; default risk; industry-level data (search for similar items in EconPapers)
JEL-codes: F1 F41 G01 G32 (search for similar items in EconPapers)
Date: 2016-04
New Economics Papers: this item is included in nep-cta and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) ... -trabajo-01-2016.pdf Application/pdf
Our link check indicates that this URL is bad, the error code is: 403 Forbidden

Related works:
Journal Article: Contractual imperfections and the impact of crises on trade: Evidence from industry-level data (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Working Papers from Banco Central de Reserva del Perú Contact information at EDIRC.
Bibliographic data for series maintained by Research Unit ().

Page updated 2022-01-17
Handle: RePEc:rbp:wpaper:2016-001