Speaker: David Weinstein, Columbia University and NBER
Summary: This paper is the first to establish a causal link between the health of banks supplying trade finance and export growth. We begin by establishing that there is an interesting puzzle surrounding why exports fell so much in the last quarter of 2008. Second, we exploit Japanese matched bank-firm data to examine whether banks transmit financial shocks to exporters in the financial crisis of the 1990s. Our point estimates suggest that the decline in bank capital can explain about one third of the remarkable decline in Japanese exports in 2008, which is almost as much as can be explained by conventional trade models.