What Does Financial Crisis Tell Us About Exporter Behavior and Credit Reallocation?

38 Pages Posted: 22 Oct 2019

See all articles by Yang Jiao

Yang Jiao

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Yi Wen

Federal Reserve Bank of St. Louis - Research Department; Tsinghua University

Date Written: August 28, 2019

Abstract

Using Japanese firm data covering the Japanese financial crisis in the early 1990s, we find that exporters' domestic sales declined more significantly than their foreign sales, which in turn declined more significantly than non-exporters' sales. This stylized fact provides a new litmus test for different theories proposed in the literature to explain a trade collapse associated with a financial crisis. In this paper we embed the Melitz's (2003) model into a tractable DSGE framework with incomplete financial markets and endogenous credit allocation to explain both the Japanese firm-level data and the well-documented aggregate trade collapse during a financial crisis in world economic history. The model highlights the role of credit reallocation between non-exporters and exporters as the main mechanism in explaining exporters' behaviors and trade collapse following a financial crisis.

Keywords: Credit Crunch, Credit Reallocation, Exporter Behavior, Financial Crisis, Heterogeneous Firms, Trade Collapse

JEL Classification: E22, E32, E44, F00, F10, F11, F41

Suggested Citation

Jiao, Yang and Wen, Yi, What Does Financial Crisis Tell Us About Exporter Behavior and Credit Reallocation? (August 28, 2019). FRB St. Louis Working Paper No. 2019-23, Available at SSRN: https://ssrn.com/abstract=3473129 or http://dx.doi.org/10.20955/wp.2019.023

Yang Jiao (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

Yi Wen

Federal Reserve Bank of St. Louis - Research Department ( email )

411 Locust St
Saint Louis, MO 63011
United States
314-444-8559 (Phone)
314-444-8731 (Fax)

Tsinghua University ( email )

Beijing, 100084
China

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
38
Abstract Views
250
PlumX Metrics