1887

WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.

English

Are You Experienced?

Survival and Recovery of Trade Relations after Banking Crises

We examine the impact of banking crises on the duration of trade relations. We also investigate the effect of product-level characteristics, such as the size of exports and exporting experience, and of sector-level financial dependence variables, on the time to recover after a banking crisis. Using highly disaggregated US import data from 157 countries between 1996 and 2009, we first provide evidence that banking crises negatively affect the survival of trade relations. On average, the occurrence of a banking crisis decreases the rate of survival of trade relations by 13 percent. Moreover, we find that both the size of exports and exporting experience matter for recovery of trade relations after banking crises. Sectoral financial dependence has an experience-specific effect. Relations with more experience recover faster in financially dependent sectors. There is instead no clear evidence indicating effects of size heterogeneity, neither in financially dependent sectors nor in non-financially dependent ones. The results are robust and consistent across alternative econometric models.

English

Keywords: financial dependence, export experience, duration models, banking crises
JEL: G01: Financial Economics / General / Financial Crises; C41: Mathematical and Quantitative Methods / Econometric and Statistical Methods: Special Topics / Duration Analysis; Optimal Timing Strategies; F14: International Economics / Trade / Empirical Studies of Trade
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error