Browsing by Author "Javorcik, Beata"

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Embargo
Financial constraints and propagation of shocks in production networks
(MIT Press, 2024-03-19) Demir, Banu; Javorcik, Beata; Michalski, Tomasz K.; Ors, Evren
We examine the propagation of a small unexpected supply shock through a production network and the role financial constraints play in its transmission. Using data on almost all Turkish supplier-customer links, we exploit the heterogeneous impact of an unexpected import-tax increase for identification. We find that this relatively minor shock had a nontrivial economic impact on exposed firms and propagated downstream through affected suppliers. Importantly, we show that low-liquidity firms amplified its transmission.
Open Access
International trade and letters of credit: A double-edged sword in times of crises
(Palgrave Macmillan Ltd., 2022-01-05) Crozet, Matthieu; Demir, Banu; Javorcik, Beata
This study argues that the ability to mitigate risks associated with international trade is particularly important at times of heightened uncertainty, such as the economic crisis caused by the Covid-19 pandemic. Risk mitigation can be achieved through letters of credit (LCs), trade finance instruments providing guarantees to trading partners. As their use varies across products, exports of some products are more resilient than others during times of increased uncertainty. This situation reverses in times of financial crises when distressed banks may limit the supply of LCs. Our analysis using data on US and EU-15 exports during the Covid crisis and the Global Financial Crisis provides empirical support for these hypotheses. © 2021, International Monetary Fund.