Financial Frictions and New Exporter Dynamics

This paper studies the role of financial frictions as a barrier to international trade. We investigate new exporter dynamics in order to identify the extent to which these frictions affect export decisions. We study an economy with heterogeneous firms subject to financing constraints and working capital requirements, and calibrate it to match key moments from Chilean plant-level data. In contrast to standard models of international trade with sunk export entry costs, our model can account for new exporter dynamics. We find that financial frictions reduce the impact of a trade liberalization, suggesting that they constitute an important trade barrier.