International Trade and Financial Market Regulation: Trade Finance as Challenge for Global Economic Governance
The limited availability of trade finance can be an important barrier for international trade. Financial crises like the Asian crisis and the recent global financial crisis have caused a lack of trade finance that has resulted in reduced trade flows. Trade finance might also be affected by novel capital and leverage regulation in the context of Basel III. The project investigates to what extent this is indeed the case, in particular with a view to developing and emerging economies, and discusses improvements regarding adequate rules for trade finance.
Project Lead:
Clara Brandi
Birgit Schmitz
Time frame:
2013 - 2014
/
completed
Project description
The global financial crisis has limited the availability of trade finance. Moreover, currently, it is being debated to what extent trade finance has not only come under strain because of the financial crisis directly but also because of more stringent financial regulation (above all Basel III) that has been introduced as a reaction to the crisis.
The literature has made progress in assessing the link between trade finance and trade. Yet, the role of trade finance in developing countries and emerging economy has mostly been overlooked. The project aims to contribute to closing this research gap. Accordingly, the project investigates the role of financial market regulation for trade finance and the effect of trade finance on trade at the macro level with a special focus on developing and emerging economies.
More specifically, the project seeks to examine the following questions:
How important is trade finance across different regions - and does it matter more in developing and emerging economies as opposed to industrialized countries?
Which trade finance instruments matter in which regions - and which matter most in developing and emerging economies?
To what extent does financial market regulation affect the availability of trade finance?
Are developing and emerging economies particularly strongly affected if the availability of trade finance decreases?
Are import-dependent countries particularly strongly affected if the availability of trade finance becomes scarce?