First, the fall in exports across asia, from japan to indonesia beginning from july 2008 to the trough around february 2009, was highly synchronized. Furthermore, the global financial system is yet to recover and. A natural experiment approach with a massive earthquake. Exposure of belt and road economies to china trade shocks.
Surprisingly, we find that, despite the fact that these countries are typically heavily indebted, trade shocks play a much more important role than financial shocks. A dsge business cycle model combining endogenous firm entry and financial frictions, where firms have a choice of financing entry through debt or equity, can explain these facts. Progress made but still relatively low access to financial services 31 d. Ofi assets grew faster than the assets of banks, insurance. To circumvent endogeneity problems, we utilize the natural experiment provided by japans great hanshinawaji earthquake in 1995. The macroeconomic impact of financial and uncertainty shocks. Impact on asia and policy challenges ahead heng swee keat. Cristina fuentesalbero simon gilchrist egon zakraj. A number of observers have suggested that one reason for the dramatic decline in the world export to gdp ratio was due to declines in the availability of trade finance. Our estimates translate into an elasticity of aggregate exports with respect to tariffs of between 3. Exporters and shocks federal reserve bank of minneapolis. The article analyses the role of international supply chains as transmission channels of a financial shock. Exports and financial shocks, the quarterly journal of economics, oxford university press, vol. Mary amiti and david weinstein no 15556, nber working papers from national bureau of economic research, inc.
Between 1995 and 2015, the magnitude of chinas demand shocks was larger than that of its competition shocks. For example, in russia its exports during the first half of 2009 were only about half and its imports about threefifths of what they had been during the corresponding month in 2008 figure 9. The global financial crisis and its impact on trade. In the 2008 financial crisis, real world exports plunged. The macroeconomic impact of financial and uncertainty shocks dario caldara. Russian exports and imports in the first half of 2008 and 2009. This paper examines whether deteriorations in bank health can help explain the large drops in exports relative to output in the recent crisis. International finance and macroeconomics, international trade and investment. We study the effects of trade and financial shocks.
This paper studies the relationship between access to credit, demand shocks, and export market adjustments using firmlevel panel survey data for 24 economies in the eastern europe and central asian region. First, i show that nancial shocks can propagate upstream if there are nancial linkages of rms and nancial frictions in trade. Djankov, freund, and pham 2006 found in a sample of 180 countries that the median amount of time it takes from the moment the goods are ready to ship from the factory until the goods are loaded on a ship is. Financial shocks and exports by ling feng, chingyi lin ssrn. This paper has benefited from extensive discussions with yaniv yedidlevi. Exports and financial shocks the quarterly journal of. Exports and financial shocks european trade study group. We then develop a model with debt and equity nancing to explore how. Jul 17, 2017 the effect of the banking crises on exports is robust and additional to external demand shocks. The recent and unprecedented collapse in exports in asia has three notable features.
Exports and financial shocks federal reserve bank of new york. Exports and financial shocks 1845 there have been a number of papers documenting the added time required for international transactions. Second, i nd, based on the inputoutput matrix and the bond yield data in the u. International trade and real transmission channels of financial shocks in globalized production networks hubert escaith 1 fabien gonguet abstract. We find that financial shocks contributed significantly to the observed dynamics of real and financial variables. Firms matched to exports in the customs data are on average bigger than firms which sell exclusively to the domestic market, though there is substantial overlap in the size distributions, as illustrated in fig. To circumvent endogeneity problems, we utilize the natural experiment provided by the great hanshin awaji earthquake in 1995. Exports and financial shocks mary amiti federal reserve bank of new york david e. Weinstein columbia university and nber february 25, 2011 abstract. Mary amiti and david weinstein no 7590, cepr discussion papers from c. In particular, it turns out that trade shocks explain almost. The main adjustment mechanism to oil shocks is based on the trade channel, which focuses on the dynamics of energy exports and imports for exporting and importing countries.
No 15556, nber working papers from national bureau of economic research, inc abstract. F21, f23, f34, g21 the authors would especially like to thank geoffrey barnes and tyler bodinesmith for excellent research assistance. Exports and financial shocks d e columbia university. This paper investigates the effect of financial shocks on firms exports. Financial shocks and exports by ling feng, chingyi lin. International finance and macroeconomics, international trade and investment a striking feature of many financial crises is the collapse of exports relative to output. Both of these shocks originated in economies with large footprints in the global economy and financial system, and, as a result, they induced substantial disruptions in global financial markets. Weinstein columbia university and nber november 24, 2009 abstract. Moreover, because exports are much more dependent on finance than domestic sales for the reasons already mentioned, exports are likely to be harder hit by financial shocks. Exports and financial shocks the quarterly journal of economics. Weinstein columbia university and nber october 28, 2009 abstract. The effect of the latter is independent and additional to that of a banking shock, and is particularly significant for sectors producing durable goods.
Download citation exports and financial shocks a striking feature of many financial crises is the collapse of exports relative to. Pdf the impact of imports and exports performance on the. Feenstraa university of california, davis and nber akira sasaharab university of idaho august 18, 2017 abstract we quantify the impact on u. Proponents of a trade finance channel between banks and exporters note that exports are more sensitive to financial shocks due to the higher. The effect of the banking crises on exports is robust and additional to external demand shocks. The impact of financial crisis the university of the. Our estimates translate into an elasticity of aggregate exports with respect to tari. The assets of other financial intermediaries ofis, which includes all financial institutions that are not central banks, banks, insurance corporations, pension funds, public financial institutions or financial auxiliaries, grew by 7. Moreover, the point estimates suggest that the partial effect of a bank crisis on exports accounts for about onethird of the dramatic drop in exports observed in the japanese financial crises of the 1990s. A var documents empirically that adverse financial shocks are associated with significant declines in both new firm creation and equity values. We are also grateful for comments and suggestions from costas arkolakis, kim ruhl and jim tybout. Macroeconomic e ects of financial shocks by urban jermann and vincenzo quadrini we document the cyclical properties of u. Pdf macroeconomic volatility and terms of trade shocks.
Dec 08, 2009 a striking feature of many financial crises is the collapse of exports relative to output. This paper examines whether the drying up of trade finance can help explain the large drops in exports relative to output. Trade shocks and macroeconomic fluctuations in africa. International trade and real transmission channels of. Exports and financial shocks by mary amiti, david e. Export participation and export intensity for exporters are both relatively high, as is typical of small open economies in. Exports and financial shocks mary amiti federal reserve bank of new york and cepr david e. Proponents of a trade finance channel between banks and exporters note that exports are more sensitive to financial shocks due to the higher default risk and. This study also develops a dsge model to clarify this finding, featuring financial shocks, enforcement constraint, and firm entry. Between 1995 and 2015, the magnitude of chinas demand shocks was larger than that of.
Exporters and shocks doireann fitzgeraldy stefanie hallerz first draft. Using a unique firmlevel dataset, we single out the effect of exogenous financial shocks on firms exports by focusing on exports of firms that were not directly. The recent events in the financial sector show up as a tightening of firms financing conditions which contributed to the 20082009 recession. To circumvent endogeneity problems, we utilize the natural experiment provided by the great hanshinawaji earthquake in 1995. Pdf in this paper the impact of exports and imports on the economic growth of somalia over the period 19701991 was investigated. In the 2008 financial crisis, real world exports plunged 17 percent while gdp fell 5 percent. The impact of the financial crisis, and more generally global shocks, on. Table 1 presents summary statistics on firms and exports. Exports and financial shocks federal reserve bank of. The econometric results reveal that chi nas trade gr owth significantly affected the exports of belt and road economies. E32,e44,f40,g21 abstract a striking feature of many financial crises is the collapse of exports relative to output.
An economic shock is an event that occurs outside of an economy, and produces a significant change within an economy. Exports and financial shocks mary amiti and david e. The only financial assets available are oneperiod bonds, and. Our paper is the first to establish a causal link between the health of banks providing. A striking feature of many financial crises is the collapse of exports relative to output. Propagation of financial shocks in an inputoutput economy.
Stefanie haller is grateful for financial support from the irc under the grant titled exporters and shocks. Our paper is the first to establish a causal link between the health. Panel regressions show that worsening financial conditions discourage exports by reducing both the variety of goods exported and the export volumes of individual goods. Using a unique firmlevel dataset, we single out the effect of exogenous financial shocks on firms exports by focusing on exports of those firms that were not directly damaged. Global monitoring report on nonbank financial intermediation.