How trade credits foster exporting

Banks play a critical role in international trade by providing trade finance products that reduce the risk of exporting. This paper employs two new data sets to shed light on the magnitude and structure of this business, which, as we show, is highly concentrated in a few large banks. The two principal trade finance instruments, letters of credit and documentary collections, covered about 10 percent of U.S. exports in 2012. They are preferred for larger transactions, which indicates the existence of substantial fixed costs in the provision and use of these instruments. Letters of credit are employed the most for exports to countries with intermediate degrees of contract enforcement. Compared to documentary collections, they are used for riskier destinations. We provide a model of payment contract choice that rationalizes these empirical findings, and we discuss implications for the ongoing provision of trade finance.

show abstract

“…Empirical studies include Ng et al (1999), Love et al (2007), Giannetti et al (2011) and Klapper et al (2012). See also Eck et al (2014).…”

mentioning

confidence: 99%

International trade, risk and the role of banks

Niepmann

Schmidt‐Eisenlohr

2017

Journal of International Economics

118

View full text Add to dashboard Cite

show abstract

“…By going beyond survey data, focusing on an exogenous shock and employing a difference-in-differences approach we overcome the limitations of the existing studies and are able to provide more convincing evidence pointing towards a positive effect of market competition on trade credit provision. 2 Fourth, by pointing out the role of competition, a factor that has not been considered before, we extend the literature on determinants of financing terms in international trade transactions (Ahn, 2014;Antràs and Foley, 2015;Eck et al, 2015;Engemann et al, 2014;Glady and Potin, 2011;Hoefele et al, 2016;Niepmann and Schmidt-Eisenlohr, 2017;Schmidt-Eisenlohr, 2013) . Our study is also the first one relying on direct measures of export financing for a large sample of exporters.…”

Section: Introductionmentioning

confidence: 89%

Don’t throw in the towel, throw in trade credit!

Demir

Javorcik

2018

Journal of International Economics

View full text Add to dashboard Cite

The literature has documented how firms adjust to increased competitive pressures arising from globalization. This paper demonstrates a new margin of adjustment, namely, provision of trade credit. A simple model predicts that an increase in competitive pressures will lead exporters to provide trade credit and lower prices and that the price adjustment will be attenuated by trade credit provision. These predictions are tested in the context of an exogenous shock, the end of the Multi-Fiber Arrangement (MFA), a quota system governing trade in textiles and clothing until the end-2004. The analysis focuses on Turkey which was not subject to quotas in the EU and thus faced an increase in competition after the quotas on China had been removed. The results suggest that in the post-MFA period Turkish exports of products with binding MFA quotas prior to the shock saw an increase in the provision of trade credit and a drop in prices relative to the other products. There is also evidence that provision of trade credit generated a dampening effect on the price response to the increase in competition.

show abstract

“…The number of equations in system ( 3) is equal to the number of unknowns . To solve this system, it is necessary to set a specific type of function f. In economic and mathematical research, the following types of single-factor models are most often used for one influential factor (Eck, Engemann, and Schnitzer, 2015): ;…”

Section: Choice Of Forecasting Methodsmentioning

confidence: 99%

Planning and Forecasting Customs Revenues to the State Budget: A Case Study of Ukraine

Martyniuk¹,

Wołowiec²,

Mieszajkina³

2021

ERSJ

View full text Add to dashboard Cite

The paper aims at the studying of the planning and forecasting process, as well as the formation of a dynamic model of customs revenues to the state budget on the example of Ukraine. Design/Methodology/Approach: The methodology of the regression data analysis was used to assess the receipt of customs payments to the budget. The parameters of the regression models are selected by the Least Squares Method. To assess the significance of the regression parameters, their variances and the covariance matrix, the diagonal elements of which are the variance parameters, are calculated. Along with the linear and power model, the Brandon model is considered. The adequacy of the model for forecasting customs revenues was assessed using the coefficient of determination. Findings: Factor analysis by the method of main components allowed us to conclude that the size of tax revenues to the state budget is most influenced by two main components, monetary and macroeconomic. Multifactor regression analysis and multiple processing of statistical data resulted in finding that it is the volume of imports and the national currency that have the greatest impact on the amount of taxes and fees to the state budget. Inflationary processes are not significant, but still affect the amount of tax revenues to the state budget, which makes it possible to increase the accumulation of taxes and fees to the budget by raising prices. Practical Implications: Experiments on forecasting the receipt of taxes and fees to the budget using a dynamic model confirmed its good predictive properties and enabled us to recommend the application of the proposed dynamic model in the practice of customs and tax authorities in their planning of tax proceeds to the state budget. Originality/Value: The results of the study reflect the applicability and effectiveness of the proposed dynamic model. Consequently, the dynamic model of planning and forecasting the customs revenues to the budget may constitute an alternative to the existing models.

show abstract

How trade credits foster exporting

Cited by 36 publications

References 23 publications

International trade, risk and the role of banks

International trade, risk and the role of banks

Don’t throw in the towel, throw in trade credit!

Planning and Forecasting Customs Revenues to the State Budget: A Case Study of Ukraine

Contact Info

Product

Resources

About