The Effect of the Financial Crisis on European Experts

A striking characteristic of the recent financial crisis was the unprecedented decline in international trade. This paper studies potential effects of trade finance conditions on exports using a rich dataset on monthly exports of the major European economies on a sector level. Furthermore, time varying indicators of the financial vulnerability of each sector in every country are included. This paper is the first to distinguish the effects of credit conditions between different exporting countries as well as between different export destinations. The results suggest that in line with prior literature, the financial crisis indeed had a significant negative impact on exports. The analyzed exporting countries were similarly but not equally affected by the crisis. Export destinations were found to be important determinants of the impact of the crisis on exports. For policy makers it follows that although the crisis globally affected international trade, heterogeneous country and sector characteristics should also be considered