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Exports and bank shocks: evidence from matched firm-bank data

Spatareanu, Mariana, Manole, Vlad and Kabiri, Ali (2018) Exports and bank shocks: evidence from matched firm-bank data. Structural Change and Economic Dynamics. ISSN 0954-349X

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Identification Number: 10.1016/j.strueco.2018.06.004

Abstract

A growing literature aims to understand the structural change and cyclical factors that contributed to the Great Trade Collapse. This paper adds to the conversation by investigating the impact of bank distress on firms’ exports using matched firm-bank data for the UK. We use two novel measures of bank distress: the Basel III net stable funding ratio, as well as the market-based bank credit default swap spreads, which best capture bank default risk, especially during crises. Our detailed database provides the crucial firm-bank relationship information that allows us to directly test for the banking channel effect on the real economy, and to carefully account for various endogeneities and biases in estimation. We also test for the possible contagion of the Sovereign Debt Crisis from the GIIPS economies to the UK. We find that the severe bank distress generated by the recent crises immediately, negatively and significantly affects UK firms’ exports, independent of demand shocks. Not all firms were impacted equally: private firms and firms in industries more dependent on external finance were impacted the most, while publicly owned firms were less affected by their bank’s distress.

Item Type: Article
Official URL: https://www.sciencedirect.com/journal/structural-c...
Additional Information: © 2018 Elsevier B.V.
Divisions: Financial Markets Group
Subjects: H Social Sciences > HG Finance
JEL classification: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Sets: Research centres and groups > Financial Markets Group (FMG)
Date Deposited: 16 Aug 2018 14:23
Last Modified: 20 Feb 2019 06:52
URI: http://eprints.lse.ac.uk/id/eprint/89982

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