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Trade credit and international trade during the 2008-09 global financial crisis
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Trade credit and international trade during the 2008-09 global financial crisis

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Abstract

This paper studies the role of the credit crunch in the severe contraction of trade and economic activity at the height of the 2008-09 global financial crisis, using firm-level data from six emerging market economies in Asia. We construct firm-specific measures of global demand, which allow us to disentangle the effect of falling demand from that of financial constraints on sales. The results indicate that: (1) Although the fall in demand adversely affected the sales of all firms during the crisis, sales declined by less for firms with better pre-crisis financial conditions. (2) In the face of the decline in external financing opportunities, some firms relied more on trade credit from suppliers to supplement operating capital during the crisis, which allowed them to post relatively better sales. (3) Export-intensive firms with comparable financial vulnerability resorted less to trade credit as an alternative source of finance, and hence experienced sharper declines in sales than the domestically-oriented firms. These findings point to the presence of credit frictions among the factors that contributed to the disproportionately large decline in international trade during the crisis.

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  • Brahima Coulibaly & Horacio Sapriza & Andrei Zlate, 2011. "Trade credit and international trade during the 2008-09 global financial crisis," International Finance Discussion Papers 1020, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1020
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    Cited by:

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    2. Kazuo Ogawa & Takanori Tanaka, 2013. "The global financial crisis and small- and medium-sized enterprises in Japan: how did they cope with the crisis?," Small Business Economics, Springer, vol. 41(2), pages 401-417, August.
    3. Michalski, Tomasz & Ors, Evren, 2012. "(Interstate) Banking and (interstate) trade: Does real integration follow financial integration?," Journal of Financial Economics, Elsevier, vol. 104(1), pages 89-117.
    4. Yuko Imura & Julia Thomas, 2015. "Productive Misallocation and International Transmission of Credit Shocks," Staff Working Papers 15-19, Bank of Canada.
    5. Alexandra Born & Zeno Enders, 2019. "Global Banking, Trade, and the International Transmission of the Great Recession," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2691-2721.
    6. Giovanni Ferri & Pierluigi Murro, 2016. "A Credit Crunch Behind the Great Trade Collapse? Micro Evidence From Europe," CERBE Working Papers wpC10, CERBE Center for Relationship Banking and Economics.
    7. Ferri, Giovanni & Minetti, Raoul & Murro, Pierluigi, 2019. "Credit Relationships in the great trade collapse. Micro evidence from Europe," Journal of Financial Intermediation, Elsevier, vol. 40(C).
    8. Michael B. Devereux & Doris Poon, 2011. "Monetary Policy in Economic Crises: A Simple Model of Policy with External Financial Constraints," International Economic Journal, Taylor & Francis Journals, vol. 25(4), pages 683-711, December.
    9. Álvarez, Roberto & Sáez, Camila, 2014. "“Post financial crisis and exports expansion: Micro-evidence from Chilean exporters”," MPRA Paper 60637, University Library of Munich, Germany.
    10. Silvio Contessi & Francesca De Nicola, 2012. "What do we know about the relationship between access to finance and international trade?," Working Papers 2012-054, Federal Reserve Bank of St. Louis.
    11. José María Serena Garralda & Garima Vasishtha, 2019. "What Drives Bank-Intermediated Trade Finance? Evidence from Cross-Country Analysis," International Journal of Central Banking, International Journal of Central Banking, vol. 15(3), pages 253-283, September.
    12. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2013. "The Great Trade Collapse," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 375-400, May.
    13. Priya, Bhawna & Biswas, Indranil & Agrawal, Anupam, 2023. "The over-ordering problem in trade credit: Role of return policies," European Journal of Operational Research, Elsevier, vol. 309(2), pages 731-744.
    14. Stefano Costa & Carmine Pappalardo & Claudio Vicarelli, 2017. "Internationalization choices and Italian firm performance during the crisis," Small Business Economics, Springer, vol. 48(3), pages 753-769, March.
    15. Stanley Fischer, 2015. "Monetary Policy Lessons and the Way Ahead : a speech at the Economic Club of New York, New York, New York, March 23, 2015," Speech 839, Board of Governors of the Federal Reserve System (U.S.).
    16. José Dorich & Michael K. Johnston & Rhys R. Mendes & Stephen Murchison & Yang Zhang, 2013. "ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model," Technical Reports 100, Bank of Canada.
    17. Georgios MAGOULIOS & Persefoni POLYCHRONIDOU & Ekaterini LASKARIDOU, 2021. "The Greek-Balkan Economic Cooperation During And After The Economic Crisis (2008-2018). A Comparative Analysis Of Gdp, Foreign Trade And Foreign Direct Investment," Scientific Bulletin - Economic Sciences, University of Pitesti, vol. 20(1), pages 3-22.
    18. Mattia Di Ubaldo, 2015. "Product Cost-Share: a Catalyst of the Trade Collapse," Working Paper Series 8015, Department of Economics, University of Sussex Business School.
    19. Dogan, Aydan & Hjortsø, Ida, 2024. "The Role of Finance for Export Dynamics: Evidence from the UK," CEPR Discussion Papers 19027, C.E.P.R. Discussion Papers.
    20. Carroll, Sarah & Neumann, Rebecca, 2022. "The importance of international trade credit for industry investment," Journal of Economics and Business, Elsevier, vol. 122(C).

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