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Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
No Guarantees, No Trade: How Banks Affect Export Patterns
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.
Cite this item
Friederike Niepmann & Tim Schmidt-Eisenlohr, No Guarantees, No Trade: How Banks Affect Export Patterns, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1158, 10 Feb 2016.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Keywords: trade finance; global banks; letter of credit; exports; financial shocks
This item with handle RePEc:fip:fedgif:1158
is also listed on EconPapers
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