Abstract
Information frictions make foreign trade risky. In particular, the risk of buyer default deters firms from selling abroad. To address this issue, many countries offer export credit guarantees to provide insurance to exporters. In this paper, we investigate the causal effects of guarantees by exploiting a quasi-natural experiment in Sweden and rich register data on guarantees, firms and trade. Estimates from a fuzzy regression discontinuity design show large positive effects on the probability of exporting and the value of exports to the destination for which the guarantees are issued. These results are robust to an alternative approach using a difference-in-differences matching estimator. Further findings suggest that guarantees impact firms heterogeneously and play an important role in resolving buyer default risk and easing liquidity constraints. Larger impacts are observed in non-OECD countries, on smaller, liquidity constrained exporters and for firms selling products that face a relatively high cost of buyer default.
Original language | English |
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Article number | 103831 |
Number of pages | 23 |
Journal | Journal of International Economics |
Volume | 145 |
Early online date | 31 Oct 2023 |
DOIs | |
Publication status | Published - Nov 2023 |
Keywords
- Buyer default
- Export credit guarantees
- Firm performance
- Information frictions
- Liquidity constraints
- Trade
ASJC Scopus subject areas
- Finance
- Economics and Econometrics