Financial vulnerability and export dynamics

• Published in: World economy 2018-06, Vol.41 (6), p.1640-1663
• Main Authors: Jaud, Melise, Kiendrebeogo, Youssouf, Véganzonès‐Varoudakis, Marie‐Ange
• Format: Article
• Language: English
• Subjects: Capital; Destinations; Developing countries; Economic analysis; Economic crisis; Economic impact; Economic models; Economics and Finance; export dynamics; Exports; Finance; financial crises; financial vulnerability; Humanities and Social Sciences; LDCs; Markets; Vulnerability
• ISSN: 0378-5920; 1467-9701
• DOI: 10.1111/twec.12596

This paper examines the implication of financial shocks on firms’ export dynamics in developing economies. To address this question, we use the Exporter Dynamics Dataset, which contains new data on the microstructure of exports for 34 developing countries between 1997 and 2011, and investigate how exporter behaviour is affected by financial crises. We find that financial crises in both the origin and destination countries have a large negative effect on firm, product and destination dynamics, particularly in industries dependent on external finance. Financial crises make the costs of exporting more difficult to meet and in turn reduce firms’ ability to start exporting, introduce new products and sell to new destinations. We also find that the impact of financial crises is less pronounced in exporting countries with relatively more open capital accounts, suggesting that portfolio inflows may be a good substitute for underdeveloped domestic financial markets.