Abstract
ABSTRACTThis paper investigates the bank-level responses of a bank-intermediated instrument of trade finance to a negative global liquidity shock in Korea. Using a factor-augmented vector autoregression approach, the results show that there exists significant heterogeneity in bank-level trade-finance responses to a global liquidity shock. In addition, we find that the source of the heterogeneity is the bank-level foreign currency liquidity condition; banks with a better foreign currency liquidity condition may dampen the negative impact of a global liquidity shock on trade-finance.
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