Articles

Risk-Based Capital Requirements for Banks and International Trade

B. DEMIR-PAKEL, T. K. MICHALSKI, E. ORS

Review of Financial Studies

November 2017, vol. 30, n°11, pp.3970-4002

Departments: Economics & Decision Sciences, GREGHEC (CNRS), Finance

https://academic.oup.com/rfs/article/30/11/3970/3954037


We test the trade finance channel of exports by controlling for the bank credit channel. Using Turkey’s July 2012 adoption of Basel II as a quasi-natural experiment, we examine whether shocks to trade financing costs affect exports. With data for 16,662 Turkish exporters shipping 2,888 different products to 158 countries, we find that the share of letters-of-credit-based exports decreases (increases) when the associated risk weights for counterparty exposure increase (decrease) after the adoption of Basel II. However, growth of firm-product-country-level exports remains unaffected. Trade financing might have a lesser role in exports than previously suggested by the previous literature. © The Author 2017. Published by Oxford University Press on behalf of The Society for Financial Studies


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