A Microscopic View to Unlocking Finance and Trade: Evidence from Thailand

Abstract

We study how changes to credit supply affect exports at the firm level using highly disaggregated administrative data from Thailand. To do so, we merge transaction-level trade data from the Customs Department with account-level loan data from the Bank of Thailand between 2004 and 2015. We find that bank credit mattered for Thai exports during the Global Financial Crisis period when there was an adverse shock to the credit supply from financial institutions, leading to a decline in exports for Thai firms. However, we do not find such relationship during non-crisis periods. Our results suggest that although credit facilitates firms to have access to more destinations, export a greater variety of products, and increase sales in each product destination, it is not sufficient. Boosting exports by injecting credit to export firms could be ineffective, especially if export demand remains sluggish and there are non-financial constraints that prevent market penetration and expansion.