1996

Abstract

In this paper we integrate the costs of trade finance in a computable general equilibrium (CGE) model to evaluate the trade and output effects of counterfactual policy experiments on costs of and access to trade finance. The costs of financing international trade consist of two components: the financial costs and the costs associated with the risk of goods not being delivered, considering risk aversion of traders. These costs are determined for four ways to finance international trade (cash-in-advance, trade loans, letters of credit, and exports financed with internal working capital). Trade finance costs are a weighted average of the costs under the four different ways of financing.

JEL: F10: International Economics / Trade / General ; F14: International Economics / Trade / Empirical Studies of Trade ; F39: International Economics / International Finance / Other ; G21: Financial Economics / Financial Institutions and Services / Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
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/content/papers/10.30875/25189808-2023-1
2023-01-23
2023-12-05
http://instance.metastore.ingenta.com/content/papers/10.30875/25189808-2023-1
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  • Published online: 23 Jan 2023
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