Saturday, January 3, 2009

Trade Financing

Turkish business daily Dunya reported on Friday that the government was putting the finishing touches on a USD 900mn export credit plan:
İhracatçılar yeni yıla müjdeli bir haberle giriyor. Hükümet, küresel krizin ihracatçılar üzerindeki etkisini azaltmak için yeni bir kredi paketi hazırladı. 900 milyon dolarlık Merkez Bankası ihracat reeskont kredisini içeren paketin, önümüzdeki günlerde dış ticaretten sorumlu Devlet Bakanı Kürşad Tüzmen tarafından açıklanması bekleniyor. Yeni paketle, firmalara 10 milyon dolar limitli kredi verilecek. Kredinin faizi libor artı 0.75, vadesi ise 4 ay olacak.

Krediden yararlanacak firma kredi ödemesini ister 4 ay sonra peşin, isterse taksitle yapacak. Krediden daha önce ihracat yapmış, imalatçıihracatçı, ihracatçı veya ihracata yönelik mal üreten imalatçı vasfını haiz firmalar, ihracat belgesi veya ruhsatname sahibi işletmeler yararlanacak. Kredi kullananlar her türlü vergi, resim ve harçtan muaf olacak. Firmalar kredi başvurularını Eximbank’a yapacak. Krediden yaklaşık bin ihracatçının yararlanması düşünülüyor.
This is in line with the common thinking that the large fall in exports and imports seen recently in many countries is mainly attributable to the collapse of trade financing. For example, Menzie Chinn has recently looked at the US and China. The graph below, from his piece on the US, shows that it can't be exchange rate effects because such effects would work in opposite directions for exports and imports and also with a lag.
tradecredit4.gif
Figure 4: Log USD nominal exchange rate, broad basket (blue), goods exports, millions USD (red), and non-oil goods imports (blue), both seasonally adjusted. December USD figure is for statistics through Dec. 26. Gray shaded area denotes NBER defined trough and thereafter. Source: BEA/Census, October release, Federal Reserve, and NBER.


While the collapse of trade finance is definitely a valid candidate for explaining the plunge in trade, there are other potential explanations as well such as the general pullback in global demand and rise in protectionism. But I doubt either of the two (especially the latter) would be accountable for the global plunge in exports and imports by itself.

I am all for ingenuous ways to help the Turkish real sector combat the crisis, but at this moment, we do not have conclusive evidence on the role of financing constraints. I wonder if anyone has put the traditional export/import demand/supply equations to use: A decrease in the explanatory power of such models would provide further evidence that exporters are constrained by trade finance.

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