Abstract
English Abstract: Cross-border trade credit is credit extended by exporters and importers and makes up a considerable share of the trade finance instruments used in global trade. We use quarterly data on cross-border trade credit recorded in the International Investment Position at the International Monetary Fund and examine its effects on trade flows during the 2008-09 global financial crisis. Unlike previous studies, we find not only that the effects of trade credit are positive on average, but also that these effects are more pronounced during the crisis. Specifically, we find that the decrease in trade credit explains 8.9%-10.5% of the trade collapse during the crisis. In addition, we find that the effects of trade credit on trade flows are more pronounced during the crisis for countries with a low level of financial development in the pre-crisis period.
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