Discussion Paper Details

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Title: Exports and Financial Shocks

Author(s): Mary Amiti and David E. Weinstein

Publication Date: December 2009

Keyword(s): exports, financial crisis, financial shocks, Japan and trade finance

Programme Area(s): International Trade and Regional Economics

Abstract: A striking feature of many financial crises is the collapse of exports relative to output. In the 2008 financial crisis, real world exports plunged 17 percent while GDP fell 5 percent. This paper examines whether the drying up of trade finance can help explain the large drops in exports relative to output. This paper is the first to establish a causal link between the health of banks providing trade finance and growth in a firm?s exports relative to its domestic sales. We overcome measurement and endogeneity issues by using a unique data set, covering the Japanese financial crises of the 1990s, which enables us to match exporters with the main bank that provides them with trade finance. Our point estimates are economically and statistically significant, suggesting that trade finance accounts for about one-third of the decline in Japanese exports in the financial crises of the 1990s.

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Bibliographic Reference

Amiti, M and Weinstein, D. 2009. 'Exports and Financial Shocks'. London, Centre for Economic Policy Research.