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The author wishes to thank Charalambos Tsangarides, Shang-Jin Wei, Yo Kikuchi, Lisandro Abrego, Jian-Ye Wang, Jan Gottschalk and Luis Catao for comments, and Gloria Moreno and Kadima Kalonji for assistance with the data.
This view was shared by various market participants and authorities in a seminar on trade financing organized by the IMF on March 27, 2003 (see IMF, 2003).
There is evidence that foreign bank lending to emerging countries is procyclical (see Jeanneau and Micu, 2002). The present paper will not address this issue.
Note that the trade financing flow Fj,t is defined as the first difference of the logarithm of the outstanding short-term credit Dj,t: FINj,t = logDj,t − logDj,t-1 which is approximately equal to the change of Dj,t in percent as logDj,t − logDj,t-1 = log(ΔDj,t/Dj,t-1+1) ≈ ΔDj,t/Dj,t-1 according to the well known result log(1+x) ≈ x if x<1
Some market participants estimate that about half of all trade is financed outside the banking system.
In addition to testing presented in Table 3, we also tested for common unit root process among countries (Levin, Lin and Chu, and Breitung t-statistics) and the results were also mixed.
Our selection of explanatory variables was guided by two survey studies: Goldestein and Khan (1985) and Fullerton (1999). For an example of import equation specification including an external financing variable see Resende (1997 and 2001)