Financial Frictions and International Trade (FFIT)

Abstract:

It is well known that financial crises have implications for the real economy. One of the most striking real implications during the current crisis has been the dramatic drop in international trade around the world, even bigger than domestic activity. In this paper, the impact of financial frictions in exports and imports of an economy is studied. To do that, the project explores the effect that supply and demand shocks have in international trade, both at the extensive (through exit/entry of the least productive firms) and intensive margin (affecting the production of firms that stay in the export markets).