Government Credit and International Trade

67 Pages Posted: 8 Feb 2019 Last revised: 22 Jan 2022

See all articles by Hong Ru

Hong Ru

Nanyang Business School, Nanyang Technological University

Endong Yang

Faculty of Business Administration, University of Macau

Multiple version iconThere are 2 versions of this paper

Date Written: January 21, 2022

Abstract

Using transaction-level trade data from China Customs and loan data from the China Development Bank (CDB), we find that CDB credit to strategic industries at the top of the supply chain leads to lower prices, higher volumes, and more product varieties and destinations of exports for downstream firms. For mechanisms underlying such positive spillovers, we find that CDB loans to upstream industries significantly lower the prices of intermediate goods sold by upstream firms, which, in turn, reduces downstream firms’ costs of goods. Moreover, CDB loans to upstream industries increase accounts receivable of upstream firms and accounts payable of downstream firms.

Keywords: Government Credit, Trade Credit, Intermediate Goods

JEL Classification: E50, G21, G28, G30, H81

Suggested Citation

Ru, Hong and Yang, Endong, Government Credit and International Trade (January 21, 2022). Available at SSRN: https://ssrn.com/abstract=3324019 or http://dx.doi.org/10.2139/ssrn.3324019

Hong Ru (Contact Author)

Nanyang Business School, Nanyang Technological University ( email )

Singapore, 639798
Singapore
(+65) 67904661 (Phone)

HOME PAGE: http://https://hongru.mit.edu/

Endong Yang

Faculty of Business Administration, University of Macau ( email )

Macau

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