Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37411
Authors: 
Schmidt-Eisenlohr, Tim
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Trade, Capital Account and Currency Crises B7-V1
Abstract: 
Cross border transactions are conducted using different payment contracts, the usage of which varies across countries and over time. In this paper I build a model that can explain this observation and study implications from this for international trade. In the model exporters optimally choose payment contracts, trading off differences in enforcement and efficiency between financial markets in different countries. I find that the ability of firms to switch contracts is central to the reaction of trade to variations in financial conditions. Numerical experiments with a two-country version of the model suggest that limiting the choice between payment contracts reduces traded quantities by up to 60 percent.
Subjects: 
trade finance
payment contracts
trade patterns
financial crisis
JEL: 
F30
F12
G21
Document Type: 
Conference Paper

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