Credit Access and Market Access: Evidence From a Portuguese Credit Guarantee Scheme

Department: Finance

Speaker: Claudia Custodio (Imperial College)

Room: TBD

Abstract

We show that credit access is a key barrier to exporting. We analyze a government scheme that
provided credit guarantees to Portuguese SMEs. Regression discontinuity estimates, based
on program eligibility criteria, indicate that qualifying firms are more likely to export and to
expand their export activity. Credit access has persistent effects, disproportionately impacting
not-yet exporters and smaller firms. Our results support international trade models in which
credit allows firms to overcome sunk entry costs, leading to hysteresis in trade. We propose two
sources of these costs — trust-building and quality upgrading — and show that government
guarantees promote access to foreign markets.