November 26, 2014
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Posted by NCID

NCID was pleased to welcome Beata Javorcik, Professor of Economics at Oxford University, as she delivered a seminar on research on export financing in emerging markets (completed with Banu Demir of Bilkent University). The central question put forth in her work is what determines how an international trade transaction is financed— or, when do exporters, importers, or third parties bear risk?

More specifically, the project focuses on competition within manufacturing/export markets and consumption/import markets as a potential determinant of the means of financing. Using export data from Turkey, the analysis observes the proportion of transactions where exporters bear risk before and after two exogenous shocks, each which varies the level of competition in domestic and consumption markets.

One such shock is the retiring of the Multi-Fiber Trade Agreement, which ended quotas giving Turkish producers a competitive advantage over Asian producers in European Union consumption markets. Before this event, they see a lower share of trade on open accounts (producer borne risk) and that share increased in the post-treatment year, after the quota was gone and competition grew. Javorcik’s statistical analysis shows that “in products where quotas were binding initially, there is an increase in open account exports,” and that “producers in emerging markets tend to sell a greater share of their exports on open account terms, financed by themselves, because it makes them more competitive and allows them to get the business.”

“Our results are in line with the conclusion that if you want to boost the ability of your firms to export and you are located in the emerging market or developing country, access to financing is key.” 

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