RIEB Discussion Paper Series No.2023-15

Title

Destination Trade Credit and Exports: Evidence from Cross Country Panel Data

Abstract

We examine the impact of destination trade credit (DTC) on exports, using cross-country panel data for 2000-2018 and focusing on financing by foreign trade partners. We find DTC promotes a country's exports disproportionately more in liquidity-dependent industries, a consistent result after addressing endogeneity and various robustness tests. DTC mainly promotes trade by increasing export quantity, while lowering export prices and export varieties. Further, the effect is greater if the level of financial development of the source country is lower, but smaller if the product complexity of industries becomes higher. During the 2008 global financial crisis, DTC also contributes to export expansion, but the effect is relatively small.

Keywords

Informal finance; Destination trade credit; Exports; Cash in advance; Deferred payment

JEL Classification

F10, G20, G30

Inquiries

Changyuan LUO
Institute of World Economy, Fudan University

Shuai ZENG
School of Economics, Fudan University

Laixun ZHAO
Research Institute for Economics and Business Administration,
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059