Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93647
Authors: 
Niepmann, Friederike
Schmidt-Eisenlohr, Tim
Year of Publication: 
2013
Series/Report no.: 
Staff Report, Federal Reserve Bank of New York 659
Abstract: 
This study provides evidence that shocks to the supply of trade finance have a causal effect on U.S. exports. The identification strategy exploits variation in the importance of banks as providers of letters of credit across countries. The larger a U.S. bank's share of the trade finance market in a country is, the larger should be the effect on exports to that country if the bank reduces its supply of letters of credit. We find that supply shocks have quantitatively significant effects on export growth. A shock of one standard deviation to a country's supply of trade finance decreases exports, on average, by 2 percentage points. The effect is much larger for exports to small and risky destinations and in times when aggregate uncertainty is high. Our results imply that global banks affect export patterns and suggest that trade finance played a role in the Great Trade Collapse.
Subjects: 
trade finance
global banks
letter of credit
exports
financial shocks
JEL: 
F21
F23
F34
G21
Document Type: 
Working Paper

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