Trade Finance and Trade Flows : Panel Data Evidence From 10 Crises

Author/Editor:

Márcio Valério Ronci

Publication Date:

December 1, 2004

Electronic Access:

Free Full Text (PDF file size is 1057 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper assesses the effect of constrained trade finance on trade flows in countries undergoing financial and balance of payments crises. Most of the countries that had a major crisis had a significant trade contraction, while trade-related finance declined sharply. However, trade may also be affected by other variables such as world demand, domestic demand, banking crises, changes in export and import prices, and real exchange rate depreciation. To estimate the effect of constrained trade finance on trade flows, we estimate import and export volume equations including explicitly trade financing as an explanatory variable in addition to the usual variables such as relative prices and income. We conclude that constrained trade finance is a factor in explaining both export and import volumes in the short-run. A fall in external trade finance explains a relatively small part of the trade loss during crises, while a fall in trade financing in connection with domestic banking crisis can lead to a substantial loss of trade.

Series:

Working Paper No. 04/225

Subject:

English

Publication Date:

December 1, 2004

ISBN/ISSN:

9781451875386/1018-5941

Stock No:

WPIEA2252004

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

20

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