Trade Shocks and Credit Reallocation / Stefano Federico, Fadi Hassan, Veronica Rappoport.

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Federico, Stefano

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31111.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper identifies a credit-supply contraction that arises endogenously after trade liberalization. Banks with loan portfolios concentrated in sectors exposed to competition from China face an increase in non-performing loans after China's entry into the World Trade Organization. As a result, they reduce the supply of credit to firms, irrespective of the firm's sector of operation. This cut in credit translates into lower employment, investment, and output. Through this mechanism, the financial channel amplifies the shock to firms already hit by import competition from China and passes it on to firms in sectors expected to expand upon trade liberalization.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w31111 (Browse shelf(Opens below))	Not For Loan

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April 2023.

This paper identifies a credit-supply contraction that arises endogenously after trade liberalization. Banks with loan portfolios concentrated in sectors exposed to competition from China face an increase in non-performing loans after China's entry into the World Trade Organization. As a result, they reduce the supply of credit to firms, irrespective of the firm's sector of operation. This cut in credit translates into lower employment, investment, and output. Through this mechanism, the financial channel amplifies the shock to firms already hit by import competition from China and passes it on to firms in sectors expected to expand upon trade liberalization.