BANKING CRISES AND INTERNATIONAL TRADE: DO CREDIT CONSTRAINTS MATTER?

This paper estimates the effect of banking crises on international trade by means of gravity equations using a sample of 151 countries over the period 1975-2010. Banking crises may impact trade through two ways: demand shocks and credit constrains. Given that gravity models are a natural way to account for output fluctuations, our results rely on the financial constraints channel. We obtain that global systemic banking crises have, in general, a robust negative impact on trade flows among the countries involved whereas a small or no impact is found for individual crisis. It appears that financial constraints in the present subprime crisis have lower relevance than in some other global crises.