Don't throw in the towel, throw in trade credit!

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buir.contributor.authorDemir, Banu
dc.citation.epage189en_US
dc.citation.spage177en_US
dc.citation.volumeNumber111en_US
dc.contributor.authorDemir, Banuen_US
dc.contributor.authorJavorcik, B.en_US
dc.date.accessioned2019-02-21T16:01:43Z
dc.date.available2019-02-21T16:01:43Z
dc.date.issued2018en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractThe literature has documented how firms adjust to increased competitive pressures arising from globalization. This paper demonstrates a new margin of adjustment, namely, provision of trade credit. A simple model predicts that an increase in competitive pressures will lead exporters to provide trade credit and lower prices and that the price adjustment will be attenuated by trade credit provision. These predictions are tested in the context of an exogenous shock, the end of the Multi-Fiber Arrangement (MFA), a quota system governing trade in textiles and clothing until the end-2004. The analysis focuses on Turkey which was not subject to quotas in the EU and thus faced an increase in competition after the quotas on China had been removed. The results suggest that in the post-MFA period Turkish exports of products with binding MFA quotas prior to the shock saw an increase in the provision of trade credit and a drop in prices relative to the other products. There is also evidence that provision of trade credit generated a dampening effect on the price response to the increase in competition.
dc.embargo.release2020-03-01en_US
dc.identifier.doi10.1016/j.jinteco.2018.01.008
dc.identifier.eissn1873-0353en_US
dc.identifier.issn0022-1996
dc.identifier.urihttp://hdl.handle.net/11693/49907
dc.language.isoEnglish
dc.publisherElsevier B.V.
dc.relation.isversionofhttps://doi.org/10.1016/j.jinteco.2018.01.008
dc.source.titleJournal of International Economicsen_US
dc.subjectCompetitionen_US
dc.subjectExport financingen_US
dc.subjectMulti-Fiber Arrangementen_US
dc.subjectTrade crediten_US
dc.subjectTurkeyen_US
dc.titleDon't throw in the towel, throw in trade credit!en_US
dc.typeArticleen_US

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