Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/191423 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7398
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
Trade and innovation cause structural change. Productive factors must flow from declining to growing industries. Banks play a major role in cutting credit to non-viable firms in downsizing sectors and in providing new credit to finance investment in expanding, innovative sectors. Structural parameters of a country’s banking system thus influence comparative advantage and trade, and can magnify the gains from trade liberalization. The analysis shows how insolvency laws, minimum capital standards, and cost of bank equity determine credit reallocation, sectoral expansion and trade patterns.
Subjects: 
capital reallocation
banking
trade
comparative advantage
JEL: 
F10
G21
G28
Document Type: 
Working Paper
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