No guarantees, no trade: How banks affect export patterns

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This study provides evidence that shocks to the supply of trade finance have a causal effect on U.S. exports. The identification strategy exploits variation in the importance of banks as providers of letters of credit across countries. The larger a U.S. bank's share of the trade finance market in a country is, the larger should be the effect on exports to that country if the bank reduces its supply of letters of credit. We find that supply shocks have quantitatively significant effects on export growth. A shock of one standard deviation to a country's supply of trade finance decreases exports, on average, by 2 percentage points. The effect is much larger for exports to small and risky destinations and in times when aggregate uncertainty is high. Our results imply that global banks affect export patterns and suggest that trade finance played a role in the Great Trade Collapse. JEL-Code: F210, F230, F340, G210. Terms of use: Documents in

Payment choice in international trade: Theory and evidence from cross‐country firm‐level data

“… Additionally, readers may be interested in Ahn () and Niepmann and Schmidt‐Eisenlohr (), who study the role of letter of credit supply shocks and Demir et al. () who look at the role of Basel II for the supply of letters of credit. …”

Estimating the direct impact of bank liquidity shocks on the real economy: Evidence from letter‐of‐credit import transactions in Colombia

“…Despite the substantial research on the issue, the lack of direct trade finance data at the micro level has made it hard to evaluate the independent role of trade finance in the great trade collapse . A notable exception is Niepmann and Schmidt‐Eisenlohr () who find significant effects of U.S. banks’ letter‐of‐credit supply shocks on U.S. exports across countries during the great trade collapse. While they explore geographical variation of shocks, the current study explores variation across banks within importer–exporter pairs, further corroborating the letter‐of‐credit channel and broadening our understanding of the topic.…”

International Trade Finance from the Origins to the Present: Market Structures, Regulation and Governance

“…Recently, renewed attention has been paid in the literature to the methods and instruments used in financing international trade (International Monetary Fund, 2011;Bank for International Settlements, 2014;Niepman and Schmidt-Eisenlohr, 2017). Researchers have highlighted how shocks to the supply of trade finance can have severe repercussions on the volume of world exports and stressed the role of such shocks in the "Great Trade Collapse" that followed the 2008 global financial crisis (Ahn, Amiti and Weinstein, 2011;Del Prete and Federico, 2014;Paravisini et al, 2015;and Niepman and Schmidt-Eisenlohr, 2016).…”