Abstract
A switching regression model is employed to test for the presence of financial constraints in the determination of oil exporters′ imports from industrial countries. The main assumption of the model is the exogenous determination of this bloc′s terms of trade. The analysis uses both discrete and smooth‐switching techniques for estimating disequilibrium models. The results on the whole indicate the importance of financial constraints in trade. Further support for the framework is provided by the fact that separate estimations for the high and low absorbers appear to suggest that revenue from trade has been of greater importance for the former category.
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