Trade Finance in a Liquidity Crisis

The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case...

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Main Authors:	Ellingsen, Tore, Vlachos, Jonas
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ADVANCED ECONOMIES ALTERNATIVE SOURCES OF FUNDING ALTERNATIVE USE ARBITRAGE ASYMMETRIC INFORMATION BALANCE SHEET BANK CREDIT BANK LENDING BANKS BOND BOND MARKETS BORROWER BORROWING BORROWING COST BUSINESS RISK COLLATERAL COMMERCIAL TRANSACTIONS COMPARATIVE ADVANTAGE CONTRACT ENFORCEMENT CORPORATE FINANCE COST OF FUNDS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CRUNCH CREDIT EXTENSION CREDIT FACILITIES CREDIT FACILITY CREDIT MARKET CREDIT MARKETS CREDIT POLICIES CREDIT PROVISION CREDIT SUBSIDIES CREDIT WORTHINESS CREDITWORTHINESS CULTURAL BIASES DEBT DEFLATION DOMESTIC BANK DOMESTIC SUPPORT DURABLE DURABLE GOOD DURABLE GOODS ECONOMIC ACTIVITY ECONOMIC CRISIS ECONOMIC INTEGRATION ECONOMIC OUTLOOK ECONOMICS LITERATURE EQUITY MARKET EXCHANGE RATE EXPECTED RETURN EXPORT MARKET EXPORTER EXPORTERS EXPORTS EXTENSION OF CREDIT FINANCIAL CRISES FINANCIAL DEVELOPMENT FINANCIAL MARKETS FOREIGN BANK FOREIGN BUYER FOREIGN BUYERS FOREIGN DIRECT INVESTMENT GOVERNMENT GUARANTEES GOVERNMENT INTERVENTIONS HOLDING HOST COUNTRY ILLIQUID ASSETS INDUSTRIALIZED COUNTRIES INFORMATIONAL ASYMMETRIES INPUT PRICES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT STRATEGIES LDCS LENDERS LETTERS OF CREDIT LIBERALIZATIONS LIQUIDITY LIQUIDITY CONSTRAINTS LIQUIDITY CRISES LIQUIDITY CRISIS LOAN MARKET INTEREST MARKET INTEREST RATES MORAL HAZARD MULTINATIONAL MULTINATIONAL COMPANIES MULTINATIONALS OPPORTUNITY COST OPTIMAL INTERVENTION OUTPUT OUTSTANDING CREDIT PERISHABLE GOODS PLEDGES POLICY RESEARCH PRICE DISCRIMINATION PRODUCTION COSTS RECESSION RESERVES RETURN RETURN ON INVESTMENTS RETURNS SOCIAL NETWORKS SOCIAL VALUE SUPPLY CHAIN SUPPLY CHAINS TAX TECHNOLOGY TRANSFER TERM CREDIT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION COUNTRIES UNIFORM PRICE VALUATIONS WORLD ECONOMY WORLD TRADE
Online Access:	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091118121945 http://hdl.handle.net/10986/4328

id	okr-10986-4328
recordtype	oai_dc
spelling	okr-10986-43282021-04-23T14:02:17Z Trade Finance in a Liquidity Crisis Ellingsen, Tore Vlachos, Jonas ADVANCED ECONOMIES ALTERNATIVE SOURCES OF FUNDING ALTERNATIVE USE ARBITRAGE ASYMMETRIC INFORMATION BALANCE SHEET BANK CREDIT BANK LENDING BANKS BOND BOND MARKETS BORROWER BORROWING BORROWING COST BUSINESS RISK COLLATERAL COMMERCIAL TRANSACTIONS COMPARATIVE ADVANTAGE CONTRACT ENFORCEMENT CORPORATE FINANCE COST OF FUNDS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CRUNCH CREDIT EXTENSION CREDIT FACILITIES CREDIT FACILITY CREDIT MARKET CREDIT MARKETS CREDIT POLICIES CREDIT PROVISION CREDIT SUBSIDIES CREDIT WORTHINESS CREDITWORTHINESS CULTURAL BIASES DEBT DEFLATION DOMESTIC BANK DOMESTIC SUPPORT DURABLE DURABLE GOOD DURABLE GOODS ECONOMIC ACTIVITY ECONOMIC CRISIS ECONOMIC INTEGRATION ECONOMIC OUTLOOK ECONOMICS LITERATURE EQUITY MARKET EXCHANGE RATE EXPECTED RETURN EXPORT MARKET EXPORTER EXPORTERS EXPORTS EXTENSION OF CREDIT FINANCIAL CRISES FINANCIAL DEVELOPMENT FINANCIAL MARKETS FOREIGN BANK FOREIGN BUYER FOREIGN BUYERS FOREIGN DIRECT INVESTMENT GOVERNMENT GUARANTEES GOVERNMENT INTERVENTIONS HOLDING HOST COUNTRY ILLIQUID ASSETS INDUSTRIALIZED COUNTRIES INFORMATIONAL ASYMMETRIES INPUT PRICES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT STRATEGIES LDCS LENDERS LETTERS OF CREDIT LIBERALIZATIONS LIQUIDITY LIQUIDITY CONSTRAINTS LIQUIDITY CRISES LIQUIDITY CRISIS LOAN MARKET INTEREST MARKET INTEREST RATES MORAL HAZARD MULTINATIONAL MULTINATIONAL COMPANIES MULTINATIONALS OPPORTUNITY COST OPTIMAL INTERVENTION OUTPUT OUTSTANDING CREDIT PERISHABLE GOODS PLEDGES POLICY RESEARCH PRICE DISCRIMINATION PRODUCTION COSTS RECESSION RESERVES RETURN RETURN ON INVESTMENTS RETURNS SOCIAL NETWORKS SOCIAL VALUE SUPPLY CHAIN SUPPLY CHAINS TAX TECHNOLOGY TRANSFER TERM CREDIT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION COUNTRIES UNIFORM PRICE VALUATIONS WORLD ECONOMY WORLD TRADE The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case, buyers who reject the seller's offer fail to internalize the seller's benefit from additional liquidity. A general infusion of credit will not facilitate the beneficial transaction, but an infusion targeted at the buyer's bank's trade finance supply will do so. Since there is a need for interventions in one country to benefit actors in another, international coordination is called for. 2012-03-19T19:14:05Z 2012-03-19T19:14:05Z 2009-11-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091118121945 http://hdl.handle.net/10986/4328 English Policy Research working paper ; no. WPS 5136 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper The World Region The World Region
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ADVANCED ECONOMIES ALTERNATIVE SOURCES OF FUNDING ALTERNATIVE USE ARBITRAGE ASYMMETRIC INFORMATION BALANCE SHEET BANK CREDIT BANK LENDING BANKS BOND BOND MARKETS BORROWER BORROWING BORROWING COST BUSINESS RISK COLLATERAL COMMERCIAL TRANSACTIONS COMPARATIVE ADVANTAGE CONTRACT ENFORCEMENT CORPORATE FINANCE COST OF FUNDS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CRUNCH CREDIT EXTENSION CREDIT FACILITIES CREDIT FACILITY CREDIT MARKET CREDIT MARKETS CREDIT POLICIES CREDIT PROVISION CREDIT SUBSIDIES CREDIT WORTHINESS CREDITWORTHINESS CULTURAL BIASES DEBT DEFLATION DOMESTIC BANK DOMESTIC SUPPORT DURABLE DURABLE GOOD DURABLE GOODS ECONOMIC ACTIVITY ECONOMIC CRISIS ECONOMIC INTEGRATION ECONOMIC OUTLOOK ECONOMICS LITERATURE EQUITY MARKET EXCHANGE RATE EXPECTED RETURN EXPORT MARKET EXPORTER EXPORTERS EXPORTS EXTENSION OF CREDIT FINANCIAL CRISES FINANCIAL DEVELOPMENT FINANCIAL MARKETS FOREIGN BANK FOREIGN BUYER FOREIGN BUYERS FOREIGN DIRECT INVESTMENT GOVERNMENT GUARANTEES GOVERNMENT INTERVENTIONS HOLDING HOST COUNTRY ILLIQUID ASSETS INDUSTRIALIZED COUNTRIES INFORMATIONAL ASYMMETRIES INPUT PRICES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT STRATEGIES LDCS LENDERS LETTERS OF CREDIT LIBERALIZATIONS LIQUIDITY LIQUIDITY CONSTRAINTS LIQUIDITY CRISES LIQUIDITY CRISIS LOAN MARKET INTEREST MARKET INTEREST RATES MORAL HAZARD MULTINATIONAL MULTINATIONAL COMPANIES MULTINATIONALS OPPORTUNITY COST OPTIMAL INTERVENTION OUTPUT OUTSTANDING CREDIT PERISHABLE GOODS PLEDGES POLICY RESEARCH PRICE DISCRIMINATION PRODUCTION COSTS RECESSION RESERVES RETURN RETURN ON INVESTMENTS RETURNS SOCIAL NETWORKS SOCIAL VALUE SUPPLY CHAIN SUPPLY CHAINS TAX TECHNOLOGY TRANSFER TERM CREDIT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION COUNTRIES UNIFORM PRICE VALUATIONS WORLD ECONOMY WORLD TRADE
spellingShingle	ADVANCED ECONOMIES ALTERNATIVE SOURCES OF FUNDING ALTERNATIVE USE ARBITRAGE ASYMMETRIC INFORMATION BALANCE SHEET BANK CREDIT BANK LENDING BANKS BOND BOND MARKETS BORROWER BORROWING BORROWING COST BUSINESS RISK COLLATERAL COMMERCIAL TRANSACTIONS COMPARATIVE ADVANTAGE CONTRACT ENFORCEMENT CORPORATE FINANCE COST OF FUNDS CREDIT CONSTRAINTS CREDIT CONTRACT CREDIT CRUNCH CREDIT EXTENSION CREDIT FACILITIES CREDIT FACILITY CREDIT MARKET CREDIT MARKETS CREDIT POLICIES CREDIT PROVISION CREDIT SUBSIDIES CREDIT WORTHINESS CREDITWORTHINESS CULTURAL BIASES DEBT DEFLATION DOMESTIC BANK DOMESTIC SUPPORT DURABLE DURABLE GOOD DURABLE GOODS ECONOMIC ACTIVITY ECONOMIC CRISIS ECONOMIC INTEGRATION ECONOMIC OUTLOOK ECONOMICS LITERATURE EQUITY MARKET EXCHANGE RATE EXPECTED RETURN EXPORT MARKET EXPORTER EXPORTERS EXPORTS EXTENSION OF CREDIT FINANCIAL CRISES FINANCIAL DEVELOPMENT FINANCIAL MARKETS FOREIGN BANK FOREIGN BUYER FOREIGN BUYERS FOREIGN DIRECT INVESTMENT GOVERNMENT GUARANTEES GOVERNMENT INTERVENTIONS HOLDING HOST COUNTRY ILLIQUID ASSETS INDUSTRIALIZED COUNTRIES INFORMATIONAL ASYMMETRIES INPUT PRICES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT STRATEGIES LDCS LENDERS LETTERS OF CREDIT LIBERALIZATIONS LIQUIDITY LIQUIDITY CONSTRAINTS LIQUIDITY CRISES LIQUIDITY CRISIS LOAN MARKET INTEREST MARKET INTEREST RATES MORAL HAZARD MULTINATIONAL MULTINATIONAL COMPANIES MULTINATIONALS OPPORTUNITY COST OPTIMAL INTERVENTION OUTPUT OUTSTANDING CREDIT PERISHABLE GOODS PLEDGES POLICY RESEARCH PRICE DISCRIMINATION PRODUCTION COSTS RECESSION RESERVES RETURN RETURN ON INVESTMENTS RETURNS SOCIAL NETWORKS SOCIAL VALUE SUPPLY CHAIN SUPPLY CHAINS TAX TECHNOLOGY TRANSFER TERM CREDIT TRADE CREDIT TRADE FINANCE TRADE FINANCING TRADING TRANSACTION TRANSITION COUNTRIES UNIFORM PRICE VALUATIONS WORLD ECONOMY WORLD TRADE Ellingsen, Tore Vlachos, Jonas Trade Finance in a Liquidity Crisis
geographic_facet	The World Region The World Region
relation	Policy Research working paper ; no. WPS 5136
description	The paper discusses the reasons for supporting international trade finance during a liquidity crisis. Targeted interventions are justified when prices are rigid and sellers insist on immediate payment due to fears of strategic default. In this case, buyers who reject the seller's offer fail to internalize the seller's benefit from additional liquidity. A general infusion of credit will not facilitate the beneficial transaction, but an infusion targeted at the buyer's bank's trade finance supply will do so. Since there is a need for interventions in one country to benefit actors in another, international coordination is called for.
format	Publications & Research :: Policy Research Working Paper
author	Ellingsen, Tore Vlachos, Jonas
author_facet	Ellingsen, Tore Vlachos, Jonas
author_sort	Ellingsen, Tore
title	Trade Finance in a Liquidity Crisis
title_short	Trade Finance in a Liquidity Crisis
title_full	Trade Finance in a Liquidity Crisis
title_fullStr	Trade Finance in a Liquidity Crisis
title_full_unstemmed	Trade Finance in a Liquidity Crisis
title_sort	trade finance in a liquidity crisis
publishDate	2012
url	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20091118121945 http://hdl.handle.net/10986/4328
_version_	1764390947422994432

Trade Finance in a Liquidity Crisis

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