EconPapers    
Economics at your fingertips  
 

Financial Development and International Trade

Fernando Leibovici

No 532, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: This paper studies the extent to which frictions in financial markets affect aggregate trade flows. I study a model of firm dynamics with financial frictions and international trade, calibrated to match key features of firm-level data. I find that, while financial frictions have a large effect on the pattern and extent of international trade at the industry-level, as documented in the literature, they have a small effect on trade at the aggregate-level. Relaxing the financial constraints allows more firms to finance the upfront export entry costs, with a significant impact on industry-level trade flows to the extent that the industry is small enough to affect equilibrium prices. In contrast, removing the financial constraints at the aggregate-level leads to an increase in the wage and interest rate, thereby reducing the returns to becoming an exporter, with a small impact on aggregate trade flows. I also find that the cross-industry response of international trade to financial development is quantitatively consistent with industry-level evidence on the extent of trade across countries, and that the effectiveness of policies aimed at increasing trade by easing the access to credit for exporters is limited if implemented at an economy-wide scale.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (19)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Financial Development and International Trade (2021) 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: https://EconPapers.repec.org/RePEc:red:sed013:532

Access Statistics for this paper

More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

 
Page updated 2025-03-19
Handle: RePEc:red:sed013:532