Extant studies examine the role of financial constraints on the international activity of the firms. However, they are mostly focused on the manufacturing sector, traditionally perceived as tradable. The literature recently recognized the growing role of service sector in international trade,...

How does bankruptcy affect the dynamics of aggregate consumption? We quantify the trade-off between the insurance and creditworthiness effects of bankruptcy in response to tighter credit. We show that bankruptcy dampens the effect of tighter credit on aggregate consumption on impact because it...