Mitigating Information Frictions in Trade: Evidence from Export Credit Guarantees

Date

2023-10-31

Advisors

Journal Title

Journal ISSN

ISSN

Volume Title

Publisher

Elsevier

Type

Article

Peer reviewed

Yes

Abstract

Information frictions make foreign trade risky. In particular, the risk of buyer default deters firms from selling abroad. To address this issue, many countries offer export credit guarantees to provide insurance to exporters. In this paper, we investigate the causal effects of guarantees by exploiting a quasi-natural experiment in Sweden and rich register data on guarantees, firms and trade. Estimates from a fuzzy regression discontinuity design show large positive effects on the probability of exporting and the value of exports to the destination for which the guarantees are issued. These results are robust to an alternative approach using a difference-in-differences matching estimator. Further findings suggest that guarantees impact firms heterogeneously and play an important role in resolving buyer default risk and easing liquidity constraints. Larger impacts are observed in non-OECD countries, on smaller, liquidity constrained exporters and for firms selling products that face a relatively high cost of buyer default.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.

Keywords

International Trade

Citation

Agarwal, N., Chan, J., Lodefalk, M., Tang, A., Tano, S., and Wang, Z. (2023) Mitigating Information Frictions in Trade: Evidence from Export Credit Guarantees. Journal of International Economics, 145, 103831

Rights

Attribution-NonCommercial-NoDerivs 2.0 UK: England & Wales
http://creativecommons.org/licenses/by-nc-nd/2.0/uk/

Research Institute

Institute for Applied Economics and Social Value (IAESV)