Why does finance matter for trade? Evidence from new data
Marc Auboin, Martina Engemann 03 December 2012
What effect does trade finance have on international trade? This column uses new data to stress the importance of trade finance for international trade both in crisis and in non-crisis periods. The major policy lesson is that there must be high levels of market incentives for supplying trade credit, particularly during a period of ‘deleveraging’ of the financial system. That said, trade credit statistics could be vastly improved if we wish to continue comparing global trade finance transactions against global trade.
Academic interest in the role of trade finance has grown in the context of the financial crisis of 2008-09 and the subsequent economic downturn, just as policymakers’ interest was once caught by the Asian financial crisis (IMF 2003).
trade, international trade, financial crisis, Trade finance, Great Recession, trade credit, trade insurance
Off the cliff and back? Credit conditions and international trade during the global financial crisis
Kalina Manova, Davin Chor 15 February 2010
Was the great trade collapse due to the evaporation of credit? This column examines how the interbank lending rate across countries affected US trade during the crisis months to confirm the role of credit conditions in influencing trade patterns. It suggests the decline in trade volumes would have been about twice as large had interbank rates remained at the high levels of September 2008.
The global financial crisis has decimated international trade. What started out as a credit crisis in the US financial sector quickly spilled over into a broader contraction in industrial production and trade for many countries. In all, world trade is expected to have fallen by up to 9% in 2009 (WTO 2009).
Global crisis International trade
international trade, global crisis, trade credit
Decline and gradual recovery of global trade financing: US and global perspectives
Jesse Mora, William M. Powers 27 November 2009
The giant and global drop in trade was concurrent with an equally colossal and global credit crunch. Did the financial market turmoil directly disrupt trade by reducing the availability of trade financing? This chapter marshals the best available evidence on the importance of trade-credit financing as a cause of the crisis. Surveys of participants indicate that trade-credit problems were the number two cause of the trade collapse (after demand). Europe and North America experienced bigger problems early in the crisis, but by mid-2009, the problem was mainly felt in Eastern Europe and Africa. The scant direct evidence, however, suggests that the drop in trade credit was shallower than the drop in trade. Policy responses to shore up trade credit were early and massive; these may have dampened credit problems.
The collapse of Lehman Brothers in September 2008 is widely viewed as the spark that triggered the global economic crisis – what has come to be known as the “Great Recession.” Global credit markets froze, and this may have affected the specialised financial instruments – letters of credit and the like – that help grease the gears of international trade finance. Some analysts view this as contributing to the drop in global trade that occurred between the third quarter of 2008 and the second quarter of 2009 (Auboin 2009).
Trade finance, great trade collapse, US trade collapse, trade credit