Financial choice in a non-ricardian model of trade
By: Katheryn N. Russ, Diego Valderrama.
Contributors: Valderrama, Diego, 1972-; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 15528; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15528.
Publisher: National Bureau of Economic Research
Published: 2009
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We join the new trade theory with a model of choice between bank and bond financing to show the differential effects of financial policy on the distribution of firm size, welfare, aggregate output, gains from trade, and the real exchange rate in a small open economy.  Increasing bank efficiency and reducing bond transaction costs both increase welfare but have opposite effects on the extensive margin of trade, aggregate exports, and the real exchange rate.  Increasing the degree of trade openness increases firms' relative demand for bond versus bank financing.  We identify a financial switching channel for gains from trade where increasing access to export markets allows firms to overcome high fixed costs of bond issuance to secure a lower marginal cost of capital"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 12/1/2009.

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