No Guarantees, No Trade

What impact do banks have on export patterns? In a recent project, Friederike Niepmann and Tim Schmidt-Eisenlohr have explored the effect of shocks to the provision of letters of credit on US exports. Based on data available at the New York Fed, they have determined that a shock of one standard deviation to a country's supply of letters of credit decreases exports, on average, by 2 percentage points. The effect is larger for exports to small and risky destinations and in industries that rely more on bank guarantees to settle international transactions. The results imply that banks can affect export patterns and suggest that trade finance played a role in the Great Trade Collapse.

While at CESifo, Ms Niepmann will continue to develop a project with her colleague Tanju Yorulmazer, with the working title "The Maturity Structure of International Debt". Using data from the Bank for International Settlements, they document that (i) the maturity structure of debt in developing countries is more volatile than in developed countries; (ii) the share of short-term debt in developing countries varies over the global business cycle: maturities shorten when global interest rates increase and uncertainty rise; and (iii) the response to global factors is stronger in countries with a weaker rule of law. The researchers plan to build an agency-based model in the spirit of Holmstrom and Tirole (1997) to explain these empirical findings.

Ms Niepmann is a member of the International Banking Research Network (IBRN) and the Center for Global Banking Studies (CGBS) at the New York Fed. The IBRN, led by Linda Goldberg and Claudia Buch, brings together central bank researchers from around the world to analyse issues pertaining to global banks. The CGBS provides a focal point for research collaborations, policy discussions, data efforts and enhanced communications between researchers and analysts within the Federal Reserve System on these issues.

Friederike Niepmann is an economist in the International Research Function at the Federal Reserve Bank of New York. In 2012 she won the CESifo Distinguished Affiliate Prize of the CESifo Research Network's Global Economy Area for her paper "Banking across Borders". Her main research interests are in international economics, in particular in international banking, and the role of financial intermediaries for international capital flows and trade. Moreover, she is interested in topics in macro and financial intermediation.

Ms Niepmann graduated with a Diplom in International Economics from the University of Tuebingen in 2008. She received her PhD from the European University Institute in Florence in June 2012, with a thesis entitled "Banking across Borders: Theory, Evidence and Implications". Giancarlo Corsetti was her supervisor.