GTAP Resources: Resource Display
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"The availability and cost of short-term trade finance and its impact on trade" by Korinek, Jane, Jean Le Cocguic and Patricia Sourdin Abstract Trade fell sharply in the recent economic crisis, compared with the drop in GDP, even considering such factors as greater vertical integration, the particularly sharp falls in goods that are more heavily traded and potential trade multiplier effects. One of the reasons for the sharp fall in trade that has been suggested in the literature may be the fall in short-term trade finance. The systemic nature of the economic crisis precipitated a general and synchronized drop of activity in the interbank market, contaminating most banks in almost all regions. The volume effect, or the perceived fall in trade finance activity, has been sharp. Trade finance to non-OECD countries fell more sharply than that to OECD countries. In order to better understand the impact of changes in short-term finance on trade flows, a econometric models were constructed. One set of models attempts to ascertain the impact on imports of domestic GDP, and availability of trade finance, proxied by short-term exposures. Another set of models attempts to ascertain the impact on total trade (i.e., imports plus exports) of domestic GDP, the demand for exports (proxied by total world GDP) and trade finance. A third set examines the trade finance effect regionally. All models examine the impact of the cost of trade financing. All models shed some light on the different impacts before the crisis (Q1 2005 to Q1 2008) and after the onset of the crisis (Q2 2008 to Q1 2009). The empirical methodology involves estimating several models using the GMM Arellano-Bond dynamic panel estimator which relate import volumes to past levels of imports, demand conditions, a trade finance proxy and other determinants of cross country imports over time. This paper finds that the drop in short-term trade finance had a significant impact on the fall in trade, but not as much so as the fall in demand. This general result confirms the findings of a qualitative survey of banking professionals. |
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- Domestic policy analysis - Economic growth |
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Public Access  2010 Conference Paper (336.3 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
