Hidden Bibliographic Details
| Other authors / contributors: | International Monetary Fund. Research Department, issuing body.
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| ISBN: | 1283554437
9781283554435
9781463927165
1463927169
1463974396
9781463974398
9786613866882
6613866881
1463946848
9781463946845
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| Notes: | At head of title: Research Department.
Title from PDF title page (IMF Web site, viewed November 23, 2011).
"November 2011."
Includes bibliographical references.
English.
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| Summary: | This paper provides a theory model of trade finance to explain the "great trade collapse." The model shows that, first, the riskiness of international transactions rises relative to domestic transactions during economic downturns, and second, the exclusive use of a letter of credit in international transactions exacerbates a collapse in trade during a financial crisis. The basic model considers banks' optimal screening decisions in the presence of counterparty default risks. In equilibrium, banks will maintain a higher precision screening test for domestic firms and a lower precision screening test for foreign firms, which constitutes the main mechanism of the model.
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| Other form: | Print version: Ahn, JaeBin. A Theory of Domestic and International Trade Finance. Washington : International Monetary Fund, ©2011 9781463924607
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