Trade Finance in Crisis : Market Adjustment or Market Failure?

As world leaders have agreed to massively support trade finance, this paper discusses the singularity of the issues related to trade finance in the context of the global economic crisis. Why should international trade finance be a particular issue...

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Bibliographic Details
Main Authors:	Chauffour, Jean-Pierre, Farole, Thomas
Format:	Policy Research Working Paper
Language:	English
Published:	2012
Subjects:	ACCESS TO BANK ACCESS TO BANKS ACCOUNTS RECEIVABLE ACCOUNTS RECEIVABLES ADB AMOUNT OF CREDIT AMOUNT OF LOAN ASSET CLASS AUCTION BAILOUTS BALANCE SHEET BALANCE SHEETS BANK BAILOUTS BANK CREDIT BANK FINANCING BANK GUARANTEE BANK LOANS BANK OF ISRAEL BANK OF KOREA BANKING LAWS BANKING SECTOR BANKING SYSTEM BANKING SYSTEMS BASIS POINTS BENEFICIARY BOND BONDS CAPITAL ADEQUACY CAPITAL FLOWS CAPITAL REQUIREMENTS CASH PAYMENTS CENTRAL BANK CENTRAL BANKS CHECKS COLLATERAL COLLATERALIZATION COLLECTIVE ACTION COMMERCIAL BANK COMMERCIAL BANKS COMMODITY PRICES CONTINGENT LIABILITY COST OF CAPITAL COUNTRY RISK CREDIT AGENCIES CREDIT AGENCY CREDIT ASSESSMENT CREDIT BUYER CREDIT CHAINS CREDIT GUARANTEE CREDIT GUARANTEES CREDIT LINE CREDIT LINES CREDIT MARKETS CREDIT RISK CREDIT SOURCE CREDIT SPREADS CREDIT SYSTEM CREDIT TRANSACTIONS CREDITWORTHINESS CURRENCY DEPOSIT DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT BANK DOMESTIC BANKING DOMESTIC BANKS DOMESTIC CREDIT DOMESTIC MARKETS ECONOMIC CRISIS EMERGING ECONOMIES EMERGING MARKET EMERGING MARKETS EQUIPMENT EXCHANGE RATE EXCHANGE RATES EXPORTER EXPORTERS EXTENSION OF CREDIT FACTORING FEDERAL RESERVE FINANCE CONSTRAINTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL INSTRUMENT FINANCIAL INSTRUMENTS FINANCIAL SHOCKS FINANCIAL STUDIES FINANCIAL SUPPORT FINANCIAL SYSTEM FLOOR PRICE FOREIGN BANK FOREIGN CURRENCY FOREIGN CURRENCY DEBT FOREIGN EXCHANGE FOREIGN EXCHANGE RESERVES FORMS OF CREDIT GLOBAL TRADE GOVERNMENT INTERVENTION GOVERNMENT INTERVENTIONS GOVERNMENT PAPER GUARANTEE FUND HOLDING INCOME TAX INFLATION INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INSTRUMENT INSURANCE INSURANCE CORPORATION INSURANCE POLICIES INSURANCE POLICY INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL BANKS INTERNATIONAL DEVELOPMENT INTERNATIONAL FINANCE INTERNATIONAL FINANCIAL MARKET INTERNATIONAL MARKETS INTERNATIONAL TRADE INTERNATIONAL TRANSACTIONS INVESTMENT CAPITAL INVESTMENT FINANCE INVESTMENT FLOWS ISLAMIC DEVELOPMENT BANK ISSUANCE JOINT-STOCK COMPANY LACK OF TRANSPARENCY LEGAL SYSTEMS LENDERS LENDING DECISIONS LENDING SPREADS LETTER OF CREDIT LETTERS OF CREDIT LEVEL PLAYING FIELD LEVY LINE OF CREDIT LINES OF CREDIT LIQUIDATION LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LIQUIDITY CRISIS LIQUIDITY POSITIONS LOAN LOAN AGREEMENT LOAN GUARANTEE LOAN PORTFOLIOS LOCAL BANKS LOSS OF CONFIDENCE MACROECONOMIC VOLATILITY MARKET BORROWINGS MARKET CONFIDENCE MARKET FAILURE MARKET FAILURES MARKET PARTICIPANTS MARKET PRACTICES MARKET PRICES MARKET RISK MARKET VALUE MATURE MARKETS MISSING MARKETS MONETARY FUND MORAL HAZARD MORAL HAZARDS MORAL SUASION MORTGAGE MULTILATERAL DEVELOPMENT BANKS NONPAYMENT OFFSHORE BANKS OPEN ECONOMIES PARTIAL GUARANTEE PARTIAL RISK PAYMENT BONDS PERFORMANCE RISK POLICY RESPONSES POLITICAL ECONOMY POLITICAL RISK PORTFOLIO PRIVATE BONDS PRIVATE INVESTORS PROBABILITY OF DEFAULT PRODUCTIVITY PROFIT MARGINS PROVISION OF CREDIT RECAPITALIZATION RECESSION REGIONAL DEVELOPMENT BANKS REPAYMENT REPAYMENT HISTORY REPOS RESERVE BANK RESERVE BANK OF INDIA RESERVES RETAINED EARNINGS RETURN RETURNS RISK EVALUATION RISK MANAGEMENT RISK PREMIUMS RISK PROFILE RISK WEIGHTED ASSETS SECONDARY MARKET SECURITY INTEREST SELF-FINANCE SETTLEMENT SHORT-TERM FINANCE SMALL BUSINESSES SOLVENCY SOURCE OF CREDIT SWAPS SYSTEMIC RISK T-BILLS TAX TRADE CREDIT TRADE CREDITS TRADE FINANCE TRADE FINANCING TRADE FLOWS TRADE VOLUME TRADING TRADING SYSTEM TRANSACTION TRANSPARENCY TRANSPORT TREASURY TREASURY BILLS UNDERLYING ASSETS VALUE OF ASSETS WORKING CAPITAL
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_20090720085356 http://hdl.handle.net/10986/4195

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Summary:	As world leaders have agreed to massively support trade finance, this paper discusses the singularity of the issues related to trade finance in the context of the global economic crisis. Why should international trade finance be a particular issue of concern in the current circumstances? Are there specific market or government failures associated with trade finance that justify a special and differential treatment of the issue by policymakers? If so, what would then be the most appropriate policy instruments to address those concerns? The paper cautions against the notion of a large trade finance "gap," yet highlights the possible rationales and conditions for an effective intervention in support of trade finance.

Trade Finance in Crisis : Market Adjustment or Market Failure?

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