Trade Credit And International Trade During The 2008-09 Global Financial Crisis

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This paper studies the role of the credit crunch in the severe contraction of trade and economic activity at the height of the 2008-09 global financial crisis, using firm-level data from six emerging market economies in Asia. The authors construct firm-specific measures of global demand, which allow them to disentangle the effect of falling demand from that of financial constraints on sales. The results indicate that: although the fall in demand adversely affected the sales of all firms during the crisis, sales declined by less for firms with better pre-crisis financial conditions.