International Trade Finance and Exports: Evidence from Korean Bank-Intermediated Trade Finance Instruments |
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Authors: | Sangyeon Hwang Hyejoon Im |
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Affiliation: | 1.Department of Economics,Incheon National University,Incheon,South Korea;2.School of Economics and Finance,Yeungnam University,Kyungsan,South Korea |
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Abstract: | This paper investigates the effects of trade finance shocks on real exports by using novel data on two bank-intermediated instruments of trade finance in Korea: foreign trade loans extended by commercial banks and documentary bills purchased by them. Using a vector autoregression (VAR) model, the results show that a negative shock to both instruments adversely affects exports, particularly the exports of small and medium-sized enterprises (SMEs). The trade financing condition explains as much as 10–14 % of the variation in exports, which is comparable to the estimates in previous studies. Noteworthy is that the effects of trade finance on SME exports vary upon whether it is pre- or post-shipment financing. |
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