Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/284830 
Authors: 
Year of Publication: 
2021
Citation: 
[Journal:] Canadian Journal of Economics/Revue canadienne d'économique [ISSN:] 1540-5982 [Volume:] 54 [Issue:] 3 [Year:] 2021 [Pages:] 1206-1251
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
This paper analyzes the effects of credit frictions in a trade model where heterogeneous firms select both into exporting and into two types of external finance. While small producers face stronger credit frictions and rely on bank finance, large firms have access to cheaper bond finance. The analysis shows that a bank credit shock leads to an increase in the share of firms that use bond finance. This selection effect is used to explain the observed decrease in bank finance relative to bond finance during the global financial crisis of 2007–2009. A calibration of the model to the crisis period documents that endogenous selection into external finance reduces the negative implications of credit frictions on product variety, exports and gains from trade.
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Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article
Document Version: 
Published Version

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