Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/145855 
Authors: 
Year of Publication: 
2016
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Trade Barriers No. G18-V1
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
This paper highlights that substitution between two types of finance represents an additional channel of adjustment to credit shocks and trade liberalization. Combining firm heterogeneity à la Melitz (2003) with credit frictions based on Holmstrom and Tirole (1997), there is selection of the largest firms into exporting and unmonitored finance, such as public debt or corporate bonds. Smaller producers serve only the domestic market and have to rely on more expensive financial intermediation. The model is consistent with empirical evidence that documents the important role of substitution effects between different sources of external credit. Producers respond to financial shocks by switching the type of finance. These selection effects lead to reallocations of market shares across firms and additional adjustments on the margins of international trade. Furthermore, the model highlights a new source of gains from trade: average productivity increases as falling trade costs allow some exporters to select into cheaper unmonitored finance.
JEL: 
F12
G32
L11
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.