The impact of credit constraints on exporting firms: Evidence from the provision and subsequent removal of subsidised credit

Mudit Kapoor, Priya Ranjan, Jibonayan Raychaudhuri (Lead Author)

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Abstract

We study the causal impact of credit constraints on exporters using a natural experiment provided by two policy changes in India, first in 1998 which made small-scale firms eligible for subsidised direct credit, and a subsequent reversal in policy in 2000 wherein some of these firms lost their eligibility. Using firms that were not affected by these policy changes as our control group in each case, we find that credit expansion increased the growth rate of bank borrowing and had a positive effect on exports. The subsequent policy reversal in 2000 had no impact on the growth rate of bank borrowing or on exports.
Original languageEnglish
Pages (from-to)2854–2874
Number of pages21
JournalWorld Economy
Volume40
Issue number12
Early online date2 May 2017
DOIs
Publication statusPublished - Dec 2017

Keywords

  • finance
  • credit constraints
  • trade
  • export probability

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