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We introduce credit frictions motivated by moral hazard in a general equilibrium model of international trade with two dimensions of heterogeneity and endogenous investments. Firms' competitiveness consists of capabilities to conduct process and quality innovations at low costs, whereas...
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This paper analyzes the effects of credit frictions in a trade model where heterogeneous firms select both into exporting and into two types of external finance. In our framework, small producers face stronger credit frictions, pay a higher borrowing rate and rely on bank finance, whereas large...
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Credit rationing and the use of collateral are widely observed in debt financing. To our view there is yet no … collateral is limited. In our model we show that credit rationing and the use of collateral are always necessary for debt … resulting from the information asymmetry. Furthermore, we extend the set of possible collateral to property rights over physical …
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