Do Trade and Capital Flows Complement Each Other? Evidence from the Us Syndicated Loan Market

44 Pages Posted: 12 Dec 2005

Date Written: December 5, 2005

Abstract

We empirically test the hypothesis that trade flows and debt flows complement each other as argued by Rajan and Zingales (2003). Using a dataset of loans made to U.S. borrowers, we find that the probability of a foreign bank participation in a loan increases as the bilateral trade between the US and the lender's country increases. We also find that as a foreign country imports more from the U.S. in the borrowing firm's industry, the probability of a bank from that country participating in the loan in-creases. On the contrary, an increase in exports by a foreign country to U.S. decreases the probability of a bank from that country participating in the loan.

Keywords: Trade flows, Capital flows, Syndicated loans, Foreign banks

Suggested Citation

Maskara, Pankaj K., Do Trade and Capital Flows Complement Each Other? Evidence from the Us Syndicated Loan Market (December 5, 2005). Available at SSRN: https://ssrn.com/abstract=868535 or http://dx.doi.org/10.2139/ssrn.868535

Pankaj K. Maskara (Contact Author)

Nova Southeastern University ( email )

3301 College Avenue
Ft. Lauderdale, FL 33314
United States