Global trade opens opportunities for economic growth. However, moving goods across borders, between exporters and importers, involves counterparty risk such as payment and liquidity risk. Trade finance facilitates trade by mitigating these risks.Using a new dataset, we find that volatile global financial conditions constrict the availability of trade finance, especially in emerging markets and developing countries. In addition, the level of development of local financial markets influences the supply of trade finance by global institutions.
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Trade finance: how volatile financial conditions influence its availability and impact trade levels
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